Use the following information for questions 1 3: CJ Jewelry Company makes and sells rings and necklaces, both of which require gold and silver to make. Actual sales in 2020 were 2,600 rings and 1,250 necklaces. On 12/31/2020, the finished goods inventory account contained 540 rings at a cost of $140 per ring and 220 necklaces at a cost of $224 per necklace. On 12/31/2020, the direct materials inventory account contained 4,700 grams of gold at a cost of $33 per gram and 600 ounces of silver at a cost of $21 per ounce.

CJ Jewelry Company is preparing its operating budget for the year 2021 and has provided the following information about expected activity in 2021:

• Sales of rings are expected to increase by 10% and sales of necklaces are expected to decrease by 20%, as compared to the 2020 unit sales amounts

• The rings are expected to sell for $350 each and the necklaces are expected to sell for $560 each

• The target ending finished goods inventory (in units) for each product is expected to equal 20%

  of its budgeted sales for the year

• Producing one ring requires 6.2 grams of gold and 0.5 ounces of silver and producing one

  necklace requires 9.3 grams of gold and 0.75 ounces of silver

• Gold is expected to cost $30 per gram and silver is expected to cost $26 per ounce

• Gross margin is expected to be 30% of budgeted revenues for the year

• Selling costs are expected to include $70,000 for packaging, $45,000 for marketing, and $16.80

  per unit sold for sales commissions and shipping

• Administrative costs are expected to include $152,000 for salaries, $96,000 for rent, and $3.50

  per unit sold for office support costs

• All inventory is accounted for using FIFO

1. Prepare the production budget in units for CJ Jewelry Company for the year 2021.

2. Prepare the direct materials usage budget in units and dollars for CJ Jewelry Company for the year 2021.

3. Prepare the budgeted income statement in dollars for CJ Jewelry Company for the year 2021.

4. Assume XYZ Manufacturing Company has already prepared its operating budget for 2021; however, Sam, the direct materials purchasing manager, has some updated information to be used in the budget. He has been under pressure to reduce the costs of direct materials and he has just negotiated a contract with a new supplier of plastic, a key direct material in the companys products. Under the terms of this contract, the new supplier will provide the company all its plastic in 2021 and they will charge the company a lower price for the plastic than the current supplier. Sam has provided this updated information on the expected price of plastic for the 2021 operating budget.

1. Use the table below in column (a) to state whether each of the parts of the operating budget will change as a result of this change in plastic supplier.

2. For the ones that will change, use column (b) to explain specifically how they will change (i.e., after the new information is incorporated into the operating budget, what exactly will be different on each part of the operating budget that you expect to change and how will it be different?)

   Operating budget parts	(a) Will it change?	(b) For the ones that change, explain specifically how it will change
   Revenues budget
   Production budget
   Direct material usage budget
   Direct material purchases budget
   Direct labor cost budget
   Manufacturing overhead cost budget
   Budgeted unit cost of ending finished goods inventory
   Ending inventories budget
   Cost of goods sold budget
   Operating costs budget
   Budgeted income statement