Power-Ride Inc. is a privately owned business in Western Canada that has found success with the production of two-wheeled, self-balancing personal transportation vehicles called Ride-Outs. The popularity of two-wheeled personal transportation vehicles is continuing to grow in both the private consumer and commercial markets. Two-wheeled personal transportation vehicles give people the option to use battery power as an alternative to cycling or walking.

Power-Ride was founded eight years ago by two siblings, Ryan and Nick, who love the outdoors. Ryan suffers from severe asthma and had to significantly reduce his outdoor activities ? until he discovered two-wheeled personal transportation vehicles during a European vacation. He is very passionate about the business. Given that the business is mostly seasonal, growth is heavily dependent on the weather; however, the company is seeing an overall steady growth pattern.

It is now October 2019, and it is time to start preparing the 2020 budget for presentation to the board.

You, CPA, are the controller for Power-Ride and have been asked by the owners to help prepare the documents required for the budget.

Ride-Out sales are highest in the spring and summer months, when private consumer purchases peak. The most profitable months are always March to May, when outdoor adventure stores are preparing for the summer season.

This past summer was a difficult one. Due to poor weather across the region, annual sales last year dipped 4% over the prior three-year average. Fortunately, there is no indication that the bad weather will repeat this year.

2019

Month Units sold

January 74

February 90

March 210

April 240

May 255

June 205

July 180

August 160

September 90

October (forecast) 85

November (forecast) 70

December (forecast) 65

Power-Ride had a one-time special order in April for 15 Ride-Outs that is not expected to occur this upcoming year. One of Power-Ride's retailers, Outfitters Inc., recently closed. It accounted for 5% of regular sales for January to March, and 8% of regular sales for the remainder of the year. The Ride-Outs currently sell for $1,400 per unit, and the company is planning to increase the selling price by 5% for the coming year.

Market research shows that two-wheeled personal transportation vehicles are gaining popularity with those who live in hilly or windy areas and those with reduced fitness levels. As a result, experts are predicting that sales growth in this market will be at least 6% in the coming year. Power-Ride requires inventories of finished goods on hand at the end of each month to be equal to 50% of the following month's budgeted sales. Power-Ride expects to have 20 units on hand on December 31, 2019.

You have completed the budgets for the production inputs for 2020, summarized below. January February March April May June Direct materials $30,624 $50,945 $75.547 $76,000 $63.230 $50,584 Direct labour $30,019 $49,940 $74,055 $74,499 $61,981 $49,585 Manufacturing overhead | $12,615 $20,986 $31, 120 $31,307 $26,046 $20,837 July August September October November December Direct materials $41,678 $32,772 $29,923 $27,608 $23.867 $22,528 Direct labour $40,855 $32,126 $29,332 $27,062 $23,395 $22,083 Manufacturing overhead $17,169 $13,500 $12,326 $11,372 $ 9,832 $ 9,280 The cost per unit of the open inventory in January is expected to be $705 per unit. You were also provided with the following to use for the selling and administrative budget. Prior-year monthly expense information and assumptions: Shipping costs $45 per unit (no expected change) Wages and salaries $20,000 expected to increase by 3% inflation only at the beginning of the year and then remain constant Depreciation $8,200 expected to stay the same Utilities $7,100 expected to increase by 3% in February and then remain constant Insurance $4,100 expected to increase by 2% on renewal in April and then remain constant Miscellaneous $2,900 expected to stay the sameThird-quarter results are in, and cost of goods sold is higher than anticipated. A direct material that had some variance in the quarter is the aluminum used in the Ride-Outs. You have decided to look at the flexible budget direct material variance related to this, as well as the flexible budget direct labour variance for all production. You have the following information to perform your analysis: Standard inputs Standard cost for one unit of output for one unit of input Direct materials 10.00 kg $32/kg Direct labour 8.00 hours $42/hour Actual performance for the company is shown below: Actual output (in units): 1,371 Direct materials: Purchased and used 13,750 kg Actual price per input $39.40/kg Direct labour: Labour hours of input 11,500 hours Actual price per hour $43.10/hour