Budget Problem

Camarero Horse Race LLC a subsidiary of Hippodrome Camarero makes transportations trailers for the racehorses, the Single

trailer, and the Double trailer. They are both made of aluminon with metal doors, where in the single trailer only can transport one

horse while in the double can transport two horses. The data for the two trailers for the year $2023$ is given in the following tables.

Direct materials

Aluminon $8$ $ Per pound

Metal $6$$ Per pound

Direct manufactiuring labor $$28$ Per direct manufacturing labor$-$hour

Resources Quantities Per Units of Output

Direct material

Aluminon

Metal

Direct manufacturing labor hours $($DMLH$)$

Machine hours

Single Trailer

$6$ pounds

$1$ pounds

$6$ hours

$13MH$

Double Trailer

$10$ pounds

$2$ pounds

$10$ hours

$20MH$

Inventory Information, Direct Materials

Camarero Horse Race LLC uses FIFO cost flow assumption for finished goods inventory.

Camarero Horse Race LLC uses an activity$-$based costing and classifies overhead onto three activity pools: Setup, Processing,

and Inspection. Activity rates for these activities are $$130$ per setup, $$5$ per machine hour, and $$20$ per inspection hour

respectively. Other information follows:

Cost Driver Information

Number of units per batch

Single Trailer

$25$

Double Trailer

Setup time per batch

Inspection time per batch

$1\mathrm{.}25$ hours

$13$

$0\mathrm{.}5$ hours

$2\mathrm{.}00$ hours

$0\mathrm{.}6$ hours

Nonmanufacturing fixed cost for year $2022$ equal $$32,000,$ of which half are salaries. Salaries are expected to increase $5\%$ in year

The only variable nonmanufacturing cost is sales commission, equal to $1\%$ of sales revenue.

Top management request that executives of the different departments works together with

management accountant team in the following budgets for the year $2023$:

Revenue budget

Production budget in units

Direct material usage budget and direct materials purchase budget

Direct manufacturing Labor cost budget

Manufacturing overhead cost budgets for each of the three activities

Budget unit cost of ending finished goods inventory and ending inventory budget.

Cost of goods sold budget.

Nonmanufacturing cost budget

Budget income statement