Kent Manufacturing Inc $($KMI$)$ has just finished the year ended Dec $31$st$,2023.$ After some ups and downs dealing with significant growth and new personnel, KMI ended the year on a relatively strong note, thanks mostly to the rationalization and consolidation of its operations. Specifically, management realized that they were trying to manufacture too many items and that caused significant inefficiencies in operations. This in turn led to unit costs that were too high in this competitive market. With the help of Costwise consultants, a lean operations specialist, KMI was able to determine what their key strengths were and how to capitalize on same.

This analysis led to the decision in late $2023$ to concentrate production on just two products$$a cherry coffee table, and a mahogany end table.

As sales grew, KMI decided to sell their old shop and rent a new facility for the time being. Their ultimate plan is to build a new state of the art facility sometime in the near future should results and growth continue their upward trend.

At present, KMI also does some custom manufacturing as it usually has some excess capacity in its rented facilities

Opening Balance Sheet

The $$actual$$ balance sheet as at December $31,2023$ is included in the budget template. $($Do not recalculate any of the numbers in the opening balance sheet. Take them as $$Given$.)$

Estimated Sales of Cherry Coffee Tables in Units for $2024$

Mr$.$ Cutter and Sally Shyster have provided you the following sales forecast which is based on results from previous years.

Nov $($actual$)480$

Dec $($actual$)520$

January $400$ July $575$ January $2025500$

February $380$ August $560$ February $2025425$

March $360$ September $625$

April $490$ October $680$

May $525$ November $610$

June $600$ December $650$

Estimated Sales of Mahogany End Tables for $2024$

Nov $($actual$)550$

Dec $($actual$)625$

January $480$ July $610$ January $2025600$

February $420$ August $700$ February $2025580$

March $510$ September $740$

April $590$ October $760$

May $625$ November $770$

June $700$ December $810$

Estimated Custom Manufacturing in $$$ for $2024$

Month Cash Received Month Work Started & Completed

December $2023$ $$12,000$ February $2024$

April $2024$ $$20,000$ May $2024$

July $2024$ $$25,000$ September $2024$

December $2024$ $$30,000$

Sales and Collections

KMI wholesales the cherry coffee table at $$215$ each and the mahogany end table at $$260$ each. All sales are on credit with terms of $2\%/$eom$,$ n$30.$ Historically, $50\%$ of the accounts receivable is paid within the discount period by month end. $30\%$ are paid in the month following sale and the remainder are paid in the second month following sale. Bad debts of $2\%$ are usually encountered and management expects no change in fiscal $2024.$

In addition, as mentioned above KMI does custom manufacturing. For all custom jobs, they insist that the total amount of the job be received in full before starting the job. The customer has to supply all the raw materials, so the only prime cost that KMI incurs on these jobs is Direct Labour. The mark up on these jobs is $100\%$ of direct labour cost $($before any benefits are factored in$).$ No sales discounts apply to these jobs and there are no bad debts applicable as the customer has paid in full before work is commenced.

Inventories, Materials Cost and Payments

Each cherry coffee table requires $22$ board feet $($BF$)$ of cherry laminate, which costs $$3\mathrm{.}00$ per bf and $$12\mathrm{.}50$ of indirect materials. The mahogany coffee table requires $20$ bf of mahogany laminate which costs $$3\mathrm{.}25$ per bf as well as indirect materials of $$14\mathrm{.}00.$ Commencing January $2023,$ management wishes the ending balance in cherry inventory to equal $20\%$ of the following month$$s production requirements and mahogany $($as it can be hard to acquire$)$ equal to $25\%$ of the following month$$s production requirement. $($Ignore indirect materials when calculating direct materials inventory.$)$ Management also expects finished goods inventory for both products to equal $20\%$ of the following month$$s sales.

Purchases of direct materials are all made on credit and $60\%$ are paid in the month of purchase with the remaining balance paid in the month following purchase.

Direct Labour Costs

Each cherry coffee table requires $145$ minutes of direct labour and the mahogany end table requires $140$ minutes. Average wage rates are $$16\mathrm{.}00$ per hour plus $20\%$ for employee benefits. The wages are all paid in the month incurred, however, the benefits are paid the month following.

Factory Overhead

The company expects to incur the following factory overhead:

Indirect materials as outlined above

Utilities $$6,200$ per month

Consumables $$1,800$ per month

Indirect labour $($See Note Below$)$ $$10,000$ per month

Benefits on indirect labour $20\%$ of indirect labour

Rent $$13,000$ per month

Equipment depreciation $($See Note B