Lucky Luggage is a company that make two types of luggage carrier: Standard and Deluxe. There are two types of direct materials: Nylon Fabric and Leather. Direct manufacturing labour workers are hired on an hourly basis, no overtime is worked. In terms of manufacturing overhead costs, there are two manufacturing overhead cost pools and two cost drivers. The two manufacturing overhead cost pools are manufacturing operations overhead and machine setup overhead. The cost drivers for manufacturing overhead are direct manufacturing labour-hours for manufacturing operations overhead costs and setup labour-hours for machine setup overhead costs. Nonmanufacturing costs consist of product design, marketing, and distribution costs.

The following data are available for the 2022 budget:

Direct Materials Rate

Nylon Fabric

Leather Direct Manufacturing labour rate

$5 per metre square (m2) $30 per metre square (m2) $25 per hour

Quantity of Material and Labour for each unit of the Product

Nylon Fabric Leather Direct Material Labour

Standard Luggage

0.50 m2

0.15 m21.5 hours

Deluxe Luggage

0.05 m2

0.60 m22.5 hours

1

Products Standard Luggage

Deluxe Luggage

Expected Sales for 2022 (in units) Selling Price Target ending inventory in units Beginning inventory in units Beginning inventory in dollars

Beginning inventory Target ending inventory

$

98,000 120 6,000 1,500150,000

$ $

31,000 270 700 40046,000

700 m2800 m2

$

Direct Materials Inventory

Nylon Fabric

1,200 m2900 m2

Leather

Manufacturing Operations Overhead Costs

Variable manufacturing operation overhead costs (per direct manufacturing labour-hour)

Fixed manufacturing operation overhead costs

Supplies Indirect manufacturing labour Power (support department costs) Maintenance (support department costs) Total variable manufacturing operation overhead cost

$ 4.25 7.20 8.25 4.75$ 24.45

DepreciationSupervision Power (support department costs) Maintenance (support department costs) Total fixed manufacturing operation overhead cost

$ $ 960,000 265,000 525,000 350,000 2,100,000

2

Machine Setup Overhead Costs

Variable machine setup overhead costs (per setup labour-hour)

Fixed machine setup overhead costs

0.2 hour of setup labour-hour is allocated to make one unit of Standard Luggage and 0.4 hour of setup labour-hour is allocated for Deluxe Luggage

Supplies Indirect manufacturing labourPower (support department) Total variable machine setup overhead cost

$ 16 22 14$ 52

Depreciation Supervision Power (Support department cost) Total fixed machine setup overhead cost

$ 240,000 410,000 17,000$ 667,000

Product Design Cost (fixed)

$ 623,000

Non-manufacturing Costs

Marketing Cost Fixed marketing cost Variable marketing cost is equals the 4% of revenues	$ 828,000
Distribution Cost Fixed distribution cost Variable distribution cost is $5 per cubic metre of luggage sold and shipped Standard Luggage0.07 cubic metre perluggagesold and shipped Deluxe Luggage0.08 cubic metre perluggagesold and shipped	$ 920,000

Required:

i. Based on the above information provided by the various department managers, prepare theBudgeted Income StatementandCost of Goods Sold Budgetfor 2022. In arriving at these two budgets, you're required to show clearly the intermediary budgets, including:

- the sales/revenue budget;

- the production budget;

- the direct material purchases and usage budgets (in quantity and dollars);

- the direct manufacturing labour (showing hours and cost);

- the manufacturing overhead cost budget;

- the ending inventories for raw materials and finished goods (show the budgeted unit

cost of inventory for each product); and

- the non-manufacturing cost budget.