Redford Corporation

Manufacturing Budget

Redford Corporation, a maker of high-strength umbrellas, is preparing a preliminary manufacturing budget for the year 2019

They have gathered the following estimate data from various teams:

Production units

400,000

Materials - metal rods/clasps

$ 0.40

per unit, before wastage

Materials - high-strength fabric

$ 1.20

Per sq. yard

Materials - Resin handles

$ 0.25

per unit

Direct Labor - Cutting and Assembly Line

$ 28.00

Per hour

Packing & Inspection Costs (variable)

$ 300.00

Per batch

Factory fixed costs

$ 300,000

Per Year

Additional information given:

Roughly 5% of metal parts are damaged or defective and are discarded as wastage

Each umbrella uses 1.5 sq. yards of high-strength fabric

Roughly 10% of the initial fabric quantity is not usable in the umbrellas due to the cutting process, but 20% of the value of this fabric is recovered by selling the unused pieces to a dealer

The current process uses roughly 20 hours of direct labor (cutting and assembly line) per batch of umbrellas

Each batch has 200 umbrellas

Q1. Prepare a Manufacturing Cost Budget for 2019 by quarter, assuming flat activity and equal-length quarters (do not adjust for days)

Q2. Prepare a High Case budget alternative assuming that production ramps up 50% in the second half.

In this scenario, assume fixed costs increase by $60,000/yr due to need for additional storage space, while variable cost structure is unchanged