Question
Adias Pty Ltd manufactures shower towels for two local football teams in Sydney. The towels are made from fabric with a logo designed by Bayswater
Adias Pty Ltd manufactures shower towels for two local football teams in Sydney. The towels are made
from fabric with a logo designed by Bayswater Logo design company. The teams are as follows:
Vida Glow: with black towels and the Vida Glow logo
Champion: with blue towels and the Champion logo
Also, the blue towels are slightly larger than the black towels.
The budgeted direct-cost inputs for each towel in 2019 are as follows:
Vida Glow shower towel Champion shower towel
Black fabric (yard) 5 - ---
Blue fabric(yard) --- 6
Logo patches for each towel 1 1
Direct manufacturing labor hours 4 5
Inventory at stock for Adias in March 2019 are as follows:
Vida Glow shower towel Champion shower towel
01/03/2019 31/03/2019 01/03/2019 31/03/2019
Black fabric (yard) 40 30 --- ---
Blue fabric(yard) 0 --- 20 20
Logo patches for each
towel
50 30 65 30
Unit cost data for direct-cost inputs pertaining to February 2019 and March 2019 are as follows:
Feb2019 (actual) March 2019 (budgeted)
Black fabric (per yard) $10 $11
Blue fabric(per yard) 14 13
Logo patches for Vida Glow (Per patch) 8 8
Logo for Champion (Per patch) 7 9
Manufacturing labor cost per hour 27 28
Manufacturing overhead is allocated on the basis of budgeted direct manufacturing labor-hours per
blanket. The budgeted variable manufacturing overhead rate for March 2019 is $17 per direct
manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2019 is $17,625. Both
variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.
Finished-goods inventory for March 2019 are as following,
Vida Glow shower towel Champion shower towel
Beginning inventory in units 14 20
Beginning inventory in dollars $1960 $ 2945
Target ending inventory in units 24 30
Budgeted sales for March 2019 are 150 units of the Vida Glow towels and 205 units of the Champion
shower towel. The budgeted selling prices per unit in March 2019 are $315 for the Vida Glow towels and
$385 for the Champion towels. Assume the following in your answer:
Work-in-process inventories are negligible and ignored.
Direct materials inventory and finished-goods inventory are costed using the FIFO method.
Unit costs of direct materials purchased and finished goods are constant in March 2017.
You need to:
1. Prepare the following budgets for March 2019:
a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct materials purchases budget
d. Direct manufacturing labor costs budget
e. Manufacturing overhead costs budget
f. Ending inventories budget (direct materials and finished goods)
g. Cost of goods sold budget
2.Suppose Adias Pty Ltd decides to incorporate continuous improvement into its budgeting process.
Describe two areas where it could incorporate continuous improvement into the budget schedules in
requirement 1.
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