Question
The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an estimated annual production of 4,400 kayaks during 2022.
The Current Designs staff has prepared the annual manufacturing budget for the rotomolded line based on an estimated annual production of 4,400 kayaks during 2022. Each kayak will require 68 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). The polyethylene powder used in these kayaks costs $1.20 per pound, and the finishing kits cost $210each. Each kayak will use two kinds of labor2 hours of type I labor from people who run the oven and trim the plastic, and 3 hours of work from type II workers who attach the hatches and seat and other hardware. The type I employees are paid $18 per hour, and the type II are paid $15 per hour. Manufacturing overhead is budgeted at $421,000 for 2022, broken down as follows.
Variable costs | ||
Indirect materials | $52,800 | |
Manufacturing supplies | 57,200 | |
Maintenance and utilities | 101,200 | |
211,200 | ||
Fixed costs | ||
Supervision | 86,000 | |
Insurance | 12,400 | |
Depreciation | 111,400 | |
209,800 | ||
Total | $421,000 | |
During the first quarter, ended March 31, 2022, 1,150 units were actually produced with the following costs.
Polyethylene powder | $95,620 | |
Finishing kits | 241,820 | |
Type I labor | 41,400 | |
Type II labor | 53,000 | |
Indirect materials | 13,800 | |
Manufacturing supplies | 14,979 | |
Maintenance and utilities | 29,090 | |
Supervision | 19,500 | |
Insurance | 3,100 | |
Depreciation | 27,850 | |
Total | $540,159 |
(a)
Prepare the annual manufacturing budget for 2022, assuming that 4,400 kayaks will be produced. (List variable costs before fixed costs.)
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