5. Prepare the direct materials usage budget and the direct materials purchases budget. (5 marks)

6. Use the direct materials usage budget to find the budgeted allocation rate for materials-handling costs. (2.5 marks)

7. Prepare the direct manufacturing labour cost budget. (1.5 marks)

8. Prepare the manufacturing overhead cost budget for materials handling, setup 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. Prepare the cost of goods sold budget. (3 marks)

11. Prepare the non-manufacturing 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 only $70? (6 marks)

Q.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 Glass $5.30 per board metre $11.5 per sheet $14 per direct manufacturing labour- hour Direct manufacturing labour Input quantities per unit of output Chairs Tables 1.2 board metres 1.7 board metres 2 sheets Direct materials Wood Glass Direct manufacturing labour Machine-hours (MH) 3 hours 2 MH 6 hours 5 MH Inventory information, direct materials Wood Glass Beginning inventory Target ending inventory 27 200 board metres 29 360 board metres 8 700 sheets 9 500 sheets Sales and inventory information, finished goods Chairs Tables 172 000 $70 45 000 $900 Expected sales in units Selling price Target ending inventory in units Beginning inventory in units 8 400 7 500 2 050 2 150 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. Warsaw Ltd uses activity-based costing and has classified all overhead costs as shown in the table below: Budgeted variable Budgeted fixed Cost driver/allocation base Cost type Manufacturing Materials handling Set-up Processing Non- manufacturing Marketing Distribution $342 840 97 000 789 250 5600 000 300 740 5 900 000 Number of board metres used Set-up hours Machine-hours 2011 200 54 000 4 500 000 380 000 Sales revenue Number of deliveries Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables