Kayak World, Inc.

Budgetary Planning

INTRODUCTION

The Company Controller is preparing the $2022$ budget for one of Kayak Worlds

new models of kayaks. Extensive meetings with members of the sales department

and executive team have resulted in the following unit sales projections for $2022.$

Kayaks

Quarter $11,000$

Quarter $21,500$

Quarter $3750$

Quarter $4750$

Kayak World$$s policy is to have finished goods ending inventory in a quarter equal to $20\%$ of the next quarter$$s anticipated sales. Preliminary sales projections for $2023$ are $1,100$ units for the first quarter and $1,500$ units for the second quarter. Ending inventory of finished goods at December $31,2021,$ will be $200$ rotomolded kayaks.

Production of each kayak requires $54$ pounds of polyethylene powder and a finishing kit $($rope$,$ seat, hardware, etc.$).$ Company policy is that the ending inventory of polyethylene powder should be $25\%$ of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December $31,2021,$ is $19,400$ pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits.

The polyethylene powder used in these kayaks costs $$1\mathrm{.}50$ per pound, and the finishing kits cost $$170$ each. Production of a single kayak requires $2$ hours of time by more experienced, type I employees and $3$ hours of finishing time by type II employees. The type I employees are paid $$15$ per hour, and the type II employees are paid $$12$ per hour.

Selling and administrative expenses for this line are expected to be $$45$ per unit sold plus $$7,500$ per quarter. Manufacturing overhead is assigned at $150\%$ of labor costs.

REQUIREMENTS

Prepare the production budget, direct materials budget, direct labor budget, manufacturing overhead budget, and selling and administrative budget for this product line by quarter and in total for $2022.$

Follow this format:

a$)$ Offer a concise summary of the issue.

b$)$ Include graphs if appropriate.

c$)$ Perform calculations in Excel.

d$)$ Provide a summary and a clear recommendation to address the issue.