=+10-39 KKK Comprehensive problem: ABC manufacturing, two products OBJECTIVE 3 Dinettes Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table only, so the sales mix is not exactly 4:1. Dinettes Ltd is planning its annual budget for the financial year 2014. Information for 2014 follows:

Input prices Direct materials Wood $6.40 per board metre Glass $12 per sheet Direct manufacturing labour $15 per direct manufacturing labour-hour Input quantities per unit of output Chairs Tables Direct materials Wood 1.25 board metres 1.75 board metres Glass — 2 sheets Direct manufacturing labour 4 hours 8 hours Machine-hours (MH) 3 MH 5 MH Inventory information, direct materials Wood Glass Beginning inventory 27 300 board metres 8 750 sheets Target ending inventory 29 375 board metres 9 000 sheets Cost of beginning inventory $170 352 $109 375 Chapter 10: Master budget and responsibility accounting 413 M10_HORN3377_02_LT_C10.indd 413 2/09/13 3:46 PM Dinettes Ltd accounts for direct materials using a FIFO cost flow.

Sales and inventory information, finished goods Chairs Tables Expected sales in units 172 000 45 000 Selling price $80 $900 Target ending inventory in units 8 500 2 250 Beginning inventory in units 8 000 2 100 Beginning inventory in dollars $760 000 $477 000 Dinettes Ltd uses a FIFO cost flow assumption for finished goods inventory.

Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs and two hours to set up for a batch of tables.

Dinettes Ltd uses activity-based costing and has classified all overhead costs as shown in the table below:

Cost type Budgeted variable Budgeted fixed Cost driver/allocation base Manufacturing:

Materials handling $342 840 $600 000 Number of board metres used Set-up 97 000 300 740 Set-up hours Processing 789 250 5 900 000 Machine hours Non-manufacturing:

Marketing 2 011 200 4 500 000 Sales revenue Distribution 54 000 380 000 Number of deliveries Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables.

Required Do the following for the year 2014:

1 Prepare the revenues budget.

2 Use the revenues budget to:

a find the budgeted allocation rate for marketing costs b find the budgeted number of deliveries and allocation rate for distribution costs.