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Case Study: KIT Galore KIT Galore is a company that make two types of dining furniture: Grand and Majestic. There are two types of direct materials: Oak and Marri woods. 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 cost and setup labour-hours for machine setup overhead cost. Nonmanufacturing costs consist of product design, marketing, and distribution costs. The following data is available for the year ended 31 December 2020: Direct Materials Rate Oak Marri Direct Manufacturing labour rate $10.50 per meter square (m) $14 per meter square (m) $20 per hour Oak Marri Direct Manufacturing Labour Quantity of Material for Each Product Grand Furniture L Majestic Furniture 10 m2 11 m 7 m2 12 m 5 hours 7.5 hours Expected Sales for 2020 (in units) Selling Price Target ending inventory in units Beginning inventory in units Beginning inventory in dollars Products Grand Furniture Majestic Furniture 60,000 20,000 $ 980 $ 1,100 9,000 750 2,500 500 $ 525,000 $ 348,000 Direct materials inventory Oak Marri 78,000 m2 60,000 m2 85,000 m 20,000 m2 Beginning inventory Target ending inventory Data on Manufacturing Overhead Cost Manufacturing Operations Overhead cost Variable manufacturing operation overhead costs (per direct manufacturing labour-hours) Supplies Indirect manufacturing labour Power support department costs) Maintenance (support department costs) Total variable manufacturing operation overhead cost 4.50 7.00 5.50 6.00 23.00 Fixed manufacturing operation overhead cost Depreciation Supervision Power (support department costs) Maintenance (support department costs) Total fixed manufacturing operation overhead cost 1,380,000 440,000 675,000 480,000 2,975,000 Machine Setup Overhead Costs Variable machine setup overhead cost (per setup labour-hour) Supplies Indirect manufacturing labour Power support department) Total variable machine setup overhead cost Fixed machine setup overhead cost Depreciation $ 580,000 Supervision 1,068,500 Power (Support department cost) 18,000 | Total fixed machine setup overhead cost $ 1,666,500 0.2 hour of setup labour-hour is allocated to make one unit of Grand Furniture and 0.3 hour of setup labour-hour is allocated for Majestic Furniture Non-manufacturing Cost Product Design Cost (fixed) $ 1,976,000 Marketing Cost Fixed marketing cost $ 1,234,000 Variable marketing cost is equals the 6% of revenues Distribution Cost Fixed distribution cost $ 1,820,000 Variable distribution cost is $2 per cubic feet of table sold and shipped Grand Furniture 20 cubic feet per furniture sold and shipped Majestic Furniture 25 cubic feet per furniture sold and shipped Required: Parti: Based on the above information provided by the various department managers, prepare the following budgets for year end 31 December 2020: (48 marks) a. Sales/Revenue Budget (3 marks) b. Production Budget in units (3 marks) c. Direct Material Usage Budget in quantity and dollars (6 points) d. Direct Material Purchases Budget in quantity and dollars (6 points) e. Direct Manufacturing Labour Cost budget (4 points) f. Manufacturing Overhead Cost Budget (6 points) g. Budgeted unit cost of ending finished goods inventory (4 points) h. Ending Inventory Budget (4 points) i. Cost of Goods Sold Budget (4 points) j. Non-manufacturing Cost Budget (4 points) k. Budgeted Income Statement. (4 points)
