Question
XYZ company make shoes of two kinds that are athletic shoes and climbing shoes. The athletic shoes made of fabric sole and the climbing shoes
XYZ company make shoes of two kinds that are athletic shoes and climbing shoes. The athletic shoes made of fabric sole and the climbing shoes have fabriccovered leather sole. XYZ preparing its budget for Mar 2020 and has estimated sales based on past experience. The information is presented below:
| Input prices | |
| Direct materials: |
|
| Fabric | $5.25 per yard |
| Leather | $7.5 per square feet |
| Direct manufacturing labor | $16 per direct manufacturing labor hours |
| Input quantities per unit of output (per pair of shoe) | athletic | climbing |
| Direct materials: |
|
|
| Fabric | 1.2 yard | 1.4 yard |
| Leather | 0 | 2 s.f. |
| Direct manufacturing labor | 5 hours | 7 hours |
| Setup-hours per batch | 3 hours | 4 hours |
| Inventory information (Direct material) | Fabric | Leather |
| Beginning inventory | 620 yards | 800 s.f |
| Target ending inventory | 380 yards | 295 s.f |
| Cost of beginning inventory | $3,219 | $6,060 |
XYZ account for direct material using FIFO cost flow assumption.
| Sales and inventory information, finished goods | athletic | climbing |
| Expected sales in units (pair of shoe) | 2,000 | 3,000 |
| Selling price | $120 | $195 |
| Target ending inventory in units | 400 | 600 |
| Beginning inventory in units | 250 | 650 |
| Beginning inventory in dollar | $23,250 | $92,000 |
XYZ account for direct material using FIFO cost flow assumption.
All the shoes are made in batch of 50 pairs of shoe. XYZ incurs manufacturing overhead costs of marketing and general administration, and shipping cots. Besides materials and labor, manufacturing cost processing and inspection costs. XYZ ships 40 pair of shoe per shipment. XYZ uses activity based costing and has classified all overhead costs for the month of Mar as shown in the following table:
| Cost type | Activity | Rates |
| Manufacturing: |
|
|
| Setup | Setup-hours | $18 per set-up per batch |
| Processing | Director labor hours | $1.8 per direct labor hour |
| Inspection | Number of shoes | $1.35 per pair per batch |
| Non-manufacturing: |
|
|
| Marketing and general administration | Sales revenue | 8% |
| Shipping | Number of shipments | $15 per shipment |
Prepare the master budget that includes revenue, contribution margin, operating income and all type of costs?
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Cassy Budd
13th International Edition
1265042616, 9781265042615
