Question
,Inc., manufactures and sells snowboards. Skis manufactures a single model, the Pipex. In late 2017 Ski management accountant gathered the following data to prepare budgets
,Inc., manufactures and sells snowboards. Skis
manufactures a single model, the Pipex. In late
2017 Ski management accountant gathered the following data to prepare budgets for January 2018
The inventoriable unit cost for ending finished goods inventory on December 31,
2017, is $230.00 Assume Skis uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.
Materials and Labor Requirements
Direct materials
Wood
17
board feet (b.f.) per snowboard
Fiberglass
15 yards per snowboard Direct manufacturing labor 7 hours per snowboard
SkisSkis's
CEO expects to sell 3,910 snowboards during January
2018 at an estimated retail price of $ 1,320 per board. Further, the CEO expects
2018 beginning inventory of 700 snowboards and would like to end January 2018 with 900 snowboards in stock
Direct Materials Inventories
Beginning Inventory 1/1/2018
Ending Inventory 1/31/2018
Wood
2,100
b.f.
1,600
b.f Fiberglass 1,100 yards 2,100 yards
Variable manufacturing overhead is
$20
per direct manufacturing labor-hour. There are also $28,770
in fixed manufacturing overhead costs budgeted for January
20182018.
SkisSkis
combines both variable and fixed manufacturing overhead into a single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at the rate of
$ 350
per sales visit. The marketing plan calls for
44
sales visits during January 2018 Finally, there are
$41,000 in fixed nonmanufacturing costs budgeted for January
2018
| 2017 Unit Price | 2018 Unit Price | |||
| Wood | $38.00 | per b.f. | $40.00 | per b.f. |
| Fiberglass | $14.00 | per yard | $15.00 | per yard |
| Direct manufacturing labor | $34.00 | per hour | $35.00 | per hour |
Requirement 1. Prepare the January
20182018
revenues budget (in dollars).
| Revenue Budget | ||||||
| For January 2018 | ||||||
| Units | Selling price | Total revenues | ||||
| Snowboards | 3,910 | $1,320 | $5,161,200 | |||
Requirement 2. Prepare the January
20182018
production budget (in units).
| Production Budget | |||
| For January 2018 | |||
| Budgeted units sales | 3,910 | ||
| Add target ending finished goods inventory | 900 | ||
| Total required units | 4,810 | ||
| Deduct beginning finished goods inventory | 700 | ||
| Units of finished goods to be produced | 4,110 | ||
Requirement 3. Prepare the direct material usage and purchases budgets for January
20182018.
Begin with the physical units portion, then prepare the cost budget portion of the direct material usage budget.
| Direct Material Usage Budget in Quantity and Dollars | |||||
| For January 2018 | |||||
| Material | |||||
| Wood | Fiberglass | Total | |||
| Physical Units Budget | |||||
| Direct materials required for | |||||
| Snowboards | 69,870 | b.f. | 61,650 | yds | |
| Cost Budget | |||||
| Available from beginning direct materials inventory | |||||
| (under a FIFO cost-flow assumption) | |||||
| Wood | $79,800 | ||||
| Fiberglass | $15,400 | ||||
| To be purchased this period | |||||
| Wood | 2,710,800 | ||||
| Fiberglass | 908,250 | ||||
| Direct materials to be used this period | $2,790,600 | $923,650 | $3,714,250 |
Now prepare the direct material purchases budget for January
20182018.
| Direct Materials Purchases Budget | ||||||
| For January 2018 | ||||||
| Materials | ||||||
| Wood | Fiberglass | Total | ||||
| Physical Units Budget | ||||||
| To be used in production | b.f. | yards | ||||
| Add target ending inventory | 1,600 | b.f. | 2,100 | yards | ||
| Total requirement | b.f. | yards | ||||
| Deduct beginning inventory | 2,100 | b.f. | 1,100 | yards | ||
| Purchases to be made | b.f. | yards | ||||
| Cost Budget | ||||||
| Purchases | ||||||
| 1. | Prepare the January 20182018 revenues budget (in dollars). |
| 2. | Prepare the January 20182018 production budget (in units). |
| 3. | Prepare the direct material usage and purchases budgets for January 20182018. |
| 4. | Prepare a direct manufacturing labor costs budget for January 20182018. |
| 5. | Prepare a manufacturing overhead costs budget for January 20182018. |
| 6. | What is the budgeted manufacturing overhead rate for January 20182018? |
| 7. | What is the budgeted manufacturing overhead cost per output unit in January 20182018? |
| 8. | Calculate the cost of a snowboard manufactured in January 20182018. |
| 9. | Prepare an ending inventory budget for both direct materials and finished goods for January 20182018. |
| 10. | Prepare a cost of goods sold budget for January 20182018. |
| 11. | Prepare the budgeted income statement for SkisSkis, Inc., for January20182018. |
| 12. | What questions might the CEO ask the management team when reviewing the budget? Should the CEO set stretch targets? Explain briefly. |
| 13. | How does preparing the budget help SkisSkis's management team better manage the company? |
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Financial Accounting An Integrated Approach
Authors: Michael Gibbins
6th Edition
0176407251, 978-0176407254
