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:

Questions:

1) Prepare the direct materials usage budget and the direct materials purchases budget.

2) Use the direct materials usage budget to find the budgeted allocation rate for materials-handling costs.

3) Prepare the direct manufacturing labour cost budget

4) Prepare the manufacturing overhead cost budget for materials handling, set-up and processing.

5) Prepare the budgeted unit cost of finished good (16.5 marks) and ending inventories budget

6) Prepare the cost of goods sold budget.

7) Prepare the non-manufacturing overhead costs budget for marketing and distribution.

8) Prepare a budgeted income statement (ignore income taxes).

9) 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?

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 Direct materials Wood 1.2 board metres 1.7 board metres 2 sheets Glass Direct manufacturing labour Machine-hours (MH) 3 hours 2 MH 6 hours 5 MH Inventory information, direct materials Beginning inventory Target ending inventory Wood 27 200 board metres 29 360 board metres Glass 8700 sheets 500 sheets