(1.2 (Max Marks:60) Warsaw 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. Warsaw Ltd is planning its annual budget for the financial year 2020. Information for 2020 is as follows: Input prices Direct materials Wood $5.30 per board metre Glass $11.5 per sheet $14 per direct manufacturing labour- Direct manufacturing labour hour Input quantities per unit of output Chairs Tables Direct materials Wood 1.2 board metres 1.7 board metres Glass 2 sheets Direct manufacturing labour 3 hours 6 hours Machine-hours (MH) 2 MH 5 MH Inventory information, direct materials Wood Glass Beginning inventory 2? 200 board metres 8 7'00 sheets Target ending inventory 29 360 board metres 9 500 sheets Sales and inventory information, nished goods Chairs Tables Expected sales in units 172 000 45 000 Selling price $70 5900 Target ending inventory in units 8 400 2 050 Beginning inventory in units 2' 500 2 150 Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up fora batch of chairs and two hours to set up for a batch of tables. Warsaw Ltd uses activity-based costing and has classified all overhead costs as shown in the table below: Cost type Manufacturing: Materials handHng Setup Processing Non manufacturing: Marketing Distribution Budgeted variable $342 840 97' 000 789 250 2 011 200 54 000- Budgeted fixed $600 000 300 7'40 5 900 000 4 500 000 380 000 Cost driverfallocation base Number of board metres used Setup hours Machinehours Sales revenue Number of deliveries Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables. 4 Required For the year 2020: 1. 5. bud 6. Prepare the revenues budget. [1 mark) Use the revenues budget to: 1. find the budgeted allocation rate for marketing costs {1.5 marks] 2. find the budgeted number of deliveries and allocation rate for distribution costs. (3.5 marks] Prepare the production budget in units. [2 marks] Use the production budget to: 1. find the budgeted number of setups, setup hours and the allocation rate for setup costs [5 marks] 2. find the budgeted total machinehours and the allocation rate for processing costs. [2.5 marks] Prepare the direct materials usage budget and the direct materials purchases get. [5 marks] Use the direct materials usage budget to find the budgeted allocation rate for materials-handling costs. (2.5 marks] 7. 8. Prepare the direct manufacturing labour cost budget. {1.5 marks] Prepare the manufacturing overhead cost budget for materials handling, set up and processing. {1.5 marks] 9'. Prepare the budgeted unit cost of finished good {16.5 marks) and ending inventories budget. (4.5 marks] 10. 11. Prepare the cost of goods sold budget. [3 marks] Prepare the nonmanufacturing overhead costs budget for marketing and distribution. (1 mark] 12. Prepare a budgeted income statement {ignore income taxes]. {3 marks] 13. Compare the budgeted unit cost of a chair to its budgeted selling price. Why might Warsaw Ltd continue to sell the chairs for onli]r S70? {6 marks]