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 fabric-covered 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 climbing 1.4 yard Input quantities per unit of output (per pair of shoe) athletic Direct materials: Fabric 1.2 yard Leather Direct manufacturing labor 5 hours Setup-hours per batch 3 hours 2 s.r. 7 hours 4 hours Leather Inventory information (Direct material) Fabric Beginning inventory 620 yards Target ending inventory 380 yards Cost of beginning inventory $3,219 800 sf 295 sf $6,060 climbing 3,000 XYZ account for direct material using FIFO cost flow assumption. Sales and inventory information, finished goods athletic Expected sales in units (pair of shoe) 2,000 Selling price $120 Target ending inventory in units 400 Beginning inventory in units 250 Beginning inventory in dollar $23,250 $195 600 650 $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 Activity Rates Cost type Manufacturing: Setup Processing Setup-hours Director labor hours Number of shoes $18 per set-up per batch $1.8 per direct labor hour $1.35 per pair per batch Inspection Non-manufacturing: Marketing and general administration Shipping 8% Sales revenue Number of shipments $15 per shipment Prepare the master budget that includes revenue, contribution margin, operating income and all type of costs
