Bombera 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. Bombera Ltd is planning its annual budget for the financial year 2018. Information for 2018 follows:

Input prices

Direct materials Wood $5.30 per board metre Glass $11.5 per sheet Direct manufacturing labour

$14 per 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 27 200 board metres 8 700 sheets Target ending inventory 29 360 board metres 9 500 sheets

ACT501 Semester 2, 2018 Page 4 Sales and inventory information, finished goods

Chairs Tables Expected sales in units 172 000 45 000 Selling price $70 $900 Target ending inventory in units 8 400 2 050 Beginning inventory in units 7 500 2 150 Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs and two hours to set up for a batch of tables. Bombera 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 For the year 2018: 1. Prepare the revenues budget. (1 mark) 2. Use the revenues budget to: a. find the budgeted allocation rate for marketing costs (1.5 marks) b. find the budgeted number of deliveries and allocation rate for distribution costs. (3.5 marks) 3. Prepare the production budget in units. (2 marks)

ACT501 Semester 2, 2018 Page 5 4. Use the production budget to: a. find the budgeted number of set-ups, set-up hours and the allocation rate for set-up costs (5 marks) b. find the budgeted total machine-hours and the allocation rate for processing costs. (2.5 marks) 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, 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.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 Bombera Ltd continue to sell the chairs for only $70?