Case Number 3:

Aaron Furniture builds high-end hand-made dining tables. Attacus Simmons, the companys owner, has developed the following sales forecast for 2022.

	1st quarter	2nd quarter	3rd quarter	4th quarter
Forecasted sales (tables)	2,700	3,000	2,800	1,900

Because of the time needed to create each table, Aaron maintains an ending Finished Goods Inventory of 20% of the following quarters budgeted sales. Aaron has been following this inventory policy for several years. The company ended 2021 with 475 tables on hand.

The standard cost card for a table is as follows:

			Standard	Standard	Total Standard Cost
			Quantity	Price
American cherry wood			20 board feet	$4/board foot	$80
American cherry turning square (legs)			4 squares	$8/square	32
Direct labor			8 DLH	$15/DLH	120
Variable overhead			8 DLH	$45/DLH	360
Fixed overhead			8 DLH	$12/DLH	96
					$688

Required:

1. Prepare Aarons production budget for 2022. Assume that the desired ending inventory for 2022 is 500 tables. (3)
2. Aaron maintains inventory of American cherry wood equal to 5% of the following quarters production needs. On December 31, 2021, Aarons physical inventory count showed 4,800 board feet of American cherry. Due to an anticipated price increase in 2023, managers want to have 5,000 board feet of American cherry wood in inventory on December 31, 2022. Prepare Aarons 2022 direct materials purchases budget for the American cherry wood. (3)
3. Prepare Aarons direct labor budget for 2022. (3)