Messi Ltd manufactures wardrobes. You work in the accounting department and have been tasked

with preparing the Budget for the next month.

Messi makes two products:

Premium wardrobes - large wardrobes with mirrors

De Luxe wardrobes - medium-sized wardrobes with an innovative shelving solution and mirrors

Direct manufacturing labor is 3 hours for the Premium wardrobe and 5 hours for the De Luxe.

The budgeted direct material usage for each product in 2021 is:

Square meters Premium De Luxe

Mirrors 2 3

Softwood 1 5

Opening direct materials inventory for January 2021 is:

Square meters Premium De Luxe

Mirrors 40 15

Softwood 10 30

Target ending direct materials inventory (January 31) is:

Square meters Premium De Luxe

Mirrors 24 20

Softwood 6 40

Unit cost data is expected to be the same for January as it was in December 2020 for labor and all

materials as below:

December 2020 (actual) $ January 2021 (budgeted) $

Mirrors per square meter 160 160

Softwood per square meter 125 125

Manufacturing labor cost per hour 30 30

Manufacturing overhead (both variable and fixed) is allocated to each wardrobe on the basis of budgeted

direct manufacturing labor hours.

The budgeted variable manufacturing overhead rate for January 2021 is $35 per direct manufacturing

labor-hour.

The budgeted fixed manufacturing overhead for the month is $42,500. Both variable and fixed

manufacturing overhead costs are allocated to each unit of finished goods on the basis of direct

manufacturing labor-hours.

Data relating to finished goods inventory for January 2021 are:

Premium De Luxe

Opening Inventory (units) 20 5

Opening Inventory (dollars) $10,840 $4,850

Target Ending Inventory 30 15

Budgeted sales for January 2021 are 740 units of the premium and 390 units of the De Luxe. The

budgeted selling prices per unit in January 2021 are $1,020 for the Premium and $1,600 for the De

Luxe.

For the purposes of calculating COGS and Closing Inventory of finished goods, cost per unit for

January 2021 is $670 for the Premium wardrobe and $1,480 for the De Luxe wardrobe.

Assume the following in your answer:

Work-in-process inventories are negligible and ignored.

Direct materials inventory and finished goods inventory are costed using the FIFO method.

Unit costs of direct materials purchased and finished goods are constant in January 2021.

REQUIRED:

Prepare the following budgets for January 2021:

a) Revenues budget

b) Production budget in units

c) Direct materials usage budget and direct materials purchases budget (both budgets in units and $)

d) Direct manufacturing labor budget

e) Manufacturing overhead budget

f) Ending inventories budget (direct materials and finished goods)

g) Cost of goods sold budget

For each budget, prepare by-product (Premium and De Luxe) and in total.