Question 2 DC Surf Co is looking to launch a new beach towel range and has held a meeting to discuss the expectations in terms of the beach towel range. A list of the key points discussed at the meeting as follows: DC Surf Co Meeting Notes - 2 May 2016 Subject: New beach towel range . . Sales price to be $70 Annual sales - 10,000 units (12.5% of sales in July to Sep, 37.5% of sales in Oct to Dec, 37.5% of sales in January to March, 12.5% of sales in April to June) Important not to run out of stock as has happened in the past with t- shirts. Aim for 500 beach towels in stock at the end of each quarter. Manufacturing has not yet commenced and so starting inventory is nil. Materials will cost $18 per towel. It is important not to run out of materials. The fringing is imported from Europe and takes up to 35 days to arrive so we must keep back-up stock of it on hand to ensure we do not run out or manufacturing will be interrupted. There is currently $6,000 of materials (including fringing) on hand and the aim is to have this amount of material remaining at the end of each quarter. The towel fabric comes pre-printed. On average, it takes a worker 10 minutes to cut the towel to size, 15 minutes to attach the fringing and 5 minutes to attach the labels and tags and package the towel. Labour costs (including on-costs such as superannuation and payroll tax) are $28 per hour. The machinery to be used in the factory will be leased at a cost of $7,000 per month. The lease agreement states that DC Surf Co is responsible for servicing and maintenance of the equipment which is expected to cost $2,000 per quarter. A manager will be employed to supervise the production staff and will be paid a salary (including on-costs) of $80,000 per year. . . REQUIRED: Prepare the following operating budgets (with a quarterly breakdown) for the new beach towel line for the year ending 30 June 2017: + Q4 Total Sales Budget for the year ending 30 June 2017 Q1 Q2 Q3 Expected Sales (units) Selling Price ($) Expected Total Sales Revenue ($) Production Budget for the year ending 30 June 2017 Q1 Q2 Q3 Q4 Total Expected Sales (units) Add: Desired ending inventory Less: Beginning Inventory Required Production (units) Q4 Total Materials Budget for the year ending 30 June 2017 Q1 Q2 Q3 Required production (units) Material cost per unit Cost of material required for production Add: Target ending inventory ($) Total materials required Less: Beginning inventory ($) Total budgeted cost of tubs ($) Labour Budget for the year ending 30 June 2017 Q1 Q2 Q3 Q4 Total Required production (units) Labour time per unit (hours) Total labour hours required Labour cost per hour ($) Total labour cost ($)
