Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Special. The Regular sandals have cloth soles and the Special sandals have cloth covered wooden soles.

Borkenstick is preparing its budget for May 2017, and has estimated sales based on past experience.

Other information for the month of June follows:

Input Prices
Direct materials
Cloth	$ 35.00 per 1 m
Wood	$ 5.00 per 1 cm3
Direct manufacturing labor	$ 10 per direct manufacturing labor-hour

Input Quantities per Unit of Output (per pair of sandals)
	Regular	Special
Direct materials
Cloth	0.13 m	0.15 m
Wood	0	2 cm3
Direct manufacturing labor-hours (DMLH)	5 hours	7 hours
Setup-hours per 1 batch	2 hours	3 hours

Inventory information, Direct Materials
	Cloth	Wood
Beginning inventory	61.00 m	800 cm3
Target ending inventory	38.6 m	295 cm3
Cost of beginning inventory	OMR 2,146	OMR 4,040

Sales and Inventory information, Finished Goods
	Regular	Special
Expected sales in units (pairs of sandals)	? (1,500-2,500)	? (3,000-3,300)
Selling price	? (OMR 70 100)	? (OMR 100 150)
Target ending inventory in units	400	600
Beginning inventory in units	250	650
Beginning inventory in OMR	15,500	61,750

All the sandals are made in batches of 50 pairs of sandals. Borkenstick incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs.

Borkenstick ships 40 pairs of sandals per shipment.

Borkenstick uses activity-based costing and has classified all overhead costs for the month of May 2017 as shown in the following chart:

Cost type	Denominator Activity	Rate
Manufacturing:
Setup	Setup-hours	OMR 12.00 per setup-hour
Processing	Direct manufacturing labor-hours	OMR 1.20 per DMLH
Inspection	Number of pairs of sandals	OMR 0.90 per pair
Nonmanufacturing:
Marketing and General Administration	Sales revenue	8%
Shipping	Number of Shipping	OMR per shipment

REQUIRED: 1. Prepare each of the following for May 2017:

1)Revenues budget

2)Production budget in units

3)Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars

4)Direct manufacturing labor cost budget

5)Manufacturing overhead cost budgets for processing and setup activities

6)Budgeted unit cost of ending finished goods inventory and ending inventories budget

7)Cost of goods sold budget

8)Marketing and general administration costs budget .

2. Prepare a budgeted Cash Flow Statement for May, 2017.

Borkensticks balance sheet for April 31, 2017 follows. Use it and the following information to prepare a cash budget for Borkenstick for May 2017. Round to OMR.

A)All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts.

B)All purchases of materials are on account. Borkenstick pays for 80% of purchases in the month of purchase and 20% in the following month.

C)All other costs are paid in the month incurred, including the declaration and payment of a OMR 10,000 cash dividend in May.

D)Borkenstick is making monthly interest payments of 0.5% (6% per year) on a OMR 100,000 long-term loan.

E)Borkenstick plans to pay the OMR 7,200 of taxes owed as of April 30^th in the month of May. Income tax expense for May is zero.

F)30% of processing and setup costs, and 10% of marketing and general administration costs are depreciation.

Borkenstick Statement of Financial Position as of April 30, 2017 (in OMR)
Assets
Cash		6,290
Accounts receivable	216,000
Less: Allowance for Bad debts	(10,800)	205,200
Inventories
Direct materials		6,186
Finished goods		77,250
Fixed assets:	580,000
Less: Accumulated Depreciation	(90,890)	489,110
Total assets		784,036
Liabilities and Equity
Accounts Payable		10,400
Taxes Payable		7,200
Interest Payable		500
Long-term debt		100,000
Common stock		200,000
Retained Earnings		465,936
Total liabilities and equity		784,036

3. Prepare a budgeted income statement for May, 2017.

4. Prepare a budgeted Balance Sheet (Statement of Financial Position) for Borkenstick as of May 31, 2017.