The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:

BroncosBroncos, with red blankets and the BroncosBroncos logo

RamsRams, with black blankets and the RamsRams logo

Also, the black blankets are slightly larger than the red blankets.

Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket.

The budgeted variable manufacturing overhead rate for March 2017 is $24 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2017 is $47,700.

Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.

Data relating to finished goods inventory for March 2017

are as follows:

	Broncos Blanket		Rams Blanket
Beginning inventory in units	28		33
Beginning inventory in dollars (cost)	$5,880		$5,346
Target ending inventory in units	38

Budgeted sales for March 2017 are 210 units of the BroncosBroncos blankets and 230 units of the RamsRams blankets. The budgeted selling prices per unit in March 2017 are $1,124 for the BroncosBroncos blankets and $1,215 for the RamsRams blankets. Assume the following in your answer:

Work-in-process inventories are negligible and ignored.times

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 March 2017

Prepare the following budgets.

a. Prepare the revenues budget.

Revenues Budget
For the Month of March
	Units	Selling Price	Total revenues
Broncos Blankets	210	$1,124
Rams Blankets	230	1,215
Total

b. Prepare the production budget in units.

Production Budget
For the Month of March
		Broncos	Rams
Budgeted units sales		210	230
Add target ending finished goods inventory		38	43
Total required units
Deduct beginning finished goods inventory		28	33
Units of finished goods to be produced

c. Prepare the direct material usage budget and direct material purchases budget.

Begin with the physical units portion, then prepare the cost budget portion of the direct material usage budget. (For amounts with a zero balance, make sure to enter "0" in the appropriate cell.)

Direct Materials Purchases Budget
For the Month of March
		Materials
						Broncos		Rams
		Red wool		Black wool		logo patches		logo patches		Total
Physical Units Budget
To be used in production			yds.		yds.
Add target ending inventory		65	yds.	65	yds.	65		65
Total requirement			yds.		yds.
Deduct beginning inventory		75	yds.	55	yds.	85		100
Purchases to be made			yds.		yds.
Cost Budget
Purchases

Now prepare March's direct material purchases budget.

d. Prepare the direct manufacturing labor costs budget. (Abbreviation used: DMLH = Direct manufacturing labor hours)

Direct Manufacturing Labor Costs Budget
For the Month of March
	Output units		DMLH		Total		Hourly
	produced		per unit		DMLH		wage rate		Total
Broncos blankets			11.0
Rams blankets			12.0
Total

e. Prepare the manufacturing overhead costs budget.

Start by selecing the formula, and calculating the budgeted variable manufacturing overhead costs for March.

f. Prepare the ending inventories budget (direct materials and finished goods). Complete the information below by entering the appropriate amounts to calculate the unit costs of ending finished goods inventory for the BroncosBroncos blankets and RamsRams blankets. Remember the fixed manufacturing overhead rate is the total fixed manufacturing overhead divided by the total direct manufacturing labor hours.

Now prepare the ending inventories budget.

Ending Inventories Budget
March 31, 2017
	Quantity		Cost per unit		Total
Direct materials
Red wool	65		$18
Black wool	65		27
Broncos logo	65		15
Rams logo	65		16
Finished goods
Broncos blankets	38
Rams blankets	43
Total ending inventory

g. Prepare the cost of goods sold budget.

Only by reducing the budget on a monthly basis for the amounts of fixed overhead can LaboLabo Specialties continually improve fixed manufacturing overheadTo continually improve the direct material usage budget, the company should verify that the beginning inventory is as low as possible to decrease the materials used during production.Requirement 2. Suppose LaboLabo Specialties decides to incorporate continuous improvement into its budgeting process. Select two areas where it could incorporate continuous improvement into the budget schedules in requirement 1.

LaboLabo Specialties can continually improve variable manufacturing overhead by budgeting more efficient use of the allocation base. Direct manufacturing labor can incorporate continuous improvement by revising the budgeted usage of 11 hours and 12 hours on a monthly basis.

By increasing the target ending finished goods inventory, LaboLabo Specialties will reduce the production budget therefore continually improve the direct material purchases budget.