highlands Industries has the following budget information available for Feb. Uni
ID: 2578338 • Letter: H
Question
highlands Industries has the following budget information available for Feb. Units manufactured - 30,000 Factory administration 65,000 Assembly - ½ hr per unit x $12 Direct materials 2 pounds per unit x $4 Inspection $250 per batch of 1,000 units Manufacturing overhead $5 per unit Product development $20,000 Setup cost $15 per batch of 1,000
a. Use activity based costing to prepare a manufacturing cost budget for February. Clearly distinguish between unit, batch, and facility-level costs
b. the operating at highlands industries are concerned that the budgeting process is too time consuming and diverts attention from their current day to day responsibilities. Discuss the reason that highland should continue budgeting.
Explanation / Answer
a) Highland Industries Manufacturing Cost Budget For the month of February Unit(1) Batch (1000) Manufactured (30,000) Factory administration $2.17 $2,166.67 $65,000 Assembly $6 $6,000 $180,000 Direct Material Cost $8 $8,000 $240,000 Inspection $0.25 $250 $7,500 Manufacturing overhead $5 $5,000 $150,000 Product development $0.67 $20 $20,000 Setup cost $0.01 $15 $450 Total Manufacturing Costs $22.1 $21,451.67 $662,950 b) The highland industries should continue budgeting so that it can help them analyse where the money is spending and refocus on the financial plan.
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