Lace Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows: Knights, with red blankets and the Knights logo
Raiders, with black blankets and the Raider logo

Also, the black blankets are slightly larger than the red blankets

Additional information follows:

The budgeted direct-cost inputs for each product in 2013 are as follows:

	Knights Blanket	Raiders Blanket
Red wool fabric	11 yards	0
Black wool fabric	0	12 yards
Knight logo patches	1	0
Raider Logo patches	0	1
Direct manufacturing labor	10 hours	11 hours

Unit data pertaining to the direct materials for March 2013 are as follows:

Actual Beginning Direct Materials Inventory (3/1/2013)
	Knights Blanket	Raiders Blanket
Red wool fabric	70 yards	0 yards
Black wool fabric	0	50
Knight logo patches	80	0
Raider Logo patches	0	95

Actual Beginning Direct Materials Inventory (3/1/2013)
	Knights Blanket	Raiders Blanket
Red wool fabric	60 yards	0 yards
Black wool fabric	0	60
Knight logo patches	60	0
Raider Logo patches	0	60

Unit cost data for direct-cost inputs pertaining to February 2013 and March 2013 are as follows:

	February 2013 (actual)	March 2013 (Budgeted)
Red wool fabric (per yard)	$16	$17
Black wool fabric (per yard)	26	25
Knight logo patches (per patch)	14	14
Raider Logo patches (per patch)	13	15
Manufacturing labor cost per hour	33	34

Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for March 2013 is $23 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2013 is $37,480. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods. Data relating to finished goods inventory for March 2013 are as follows:

	Knights Blanket	Raiders Blanket
Beginning inventory in units	26	31
Beginning inventory in dollars (cost)	$5,200	$4,991
Target ending inventory in units	36	41

REQUIRED

1. Prepare the following budgets for March 2013:

	a.	Revenues budget
	b.	Production budget in units
	c.	Direct material usage budget and direct material purchases budget
	d.	Direct manufacturing labor budget
	e.	Manufacturing overhead budget
	f.	Ending inventories budget (direct materials and finished goods)
	g.	Cost of goods sold budget

2.	Suppose Lace Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement 1.