CD23 Creative Designs Diane Buswell is preparing the 2017 budget for one of Crea
ID: 2453201 • Letter: C
Question
CD23 Creative Designs Diane Buswell is preparing the 2017 budget for one of Creative Design's rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2017. Quarter 1 1,000 kayaks Quarter 2 1,500 kayaks Quarter 3 750 kayaks Quarter 4 750 kayaks Creative Designs' policy is to have finished goods ending inventory in a quarter equal to 20% of the next quarter's anticipated sales. Preliminary sales projections for 2018 are 1,100 units for the first quarter and 1,500 units for the second quarter. Ending inventory of finished goods at December 31, 2016, will be 200 rotomolded kayaks. Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2016 is 19,400 pounds. The finishing kits can be assembled as they are needed. As a result, Creative Designs does not maintain a significant inventory of the finished kits. The polyethylene powder used in these kayaks cost $1.50 per pound, and the finishing kits cost $170 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type II employees. The type I employees are paid $15 per hour, and the type II employees are paid $12 per hour. Selling and administrative expenses for this line are expected to be $45 per unit sold plus $7,500 per quarter. Manufacturing overhead is assigned at 150% of labor costs. Instructions Prepare the production budget, direct materials budget, direct labor budget, manufacturing overhead budget, and selling and administrative budget for this product line by quarter and in total for 2017. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . CREATIVE DESIGNS Production Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Expected unit sales Value Value Value Value ? Add: desired ending finished goods units ? ? ? ? ? Total required units ? ? ? ? ? Less: beginning finished goods units ? Value Value Value ? Required production units ? ? ? ? ? CREATIVE DESIGNS Direct Materials Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Units to be produced Value Value Value Value ? Pounds of polyethylene powder per unit x 54 lbs. x 54 lbs. x 54 lbs. x 54 lbs. x 54 lbs. Total pounds needed for production ? ? ? ? ? Add: desired ending inventory of powder Value Value Value Value ? Total pounds of powder required ? ? ? ? ? Less: beginning inventory of powder Value Value Value Value ? Pounds of polyethylene powder to be purchased ? ? ? ? ? Cost per pound x $1.50 x $1.50 x $1.50 x $1.50 x $1.50 Cost of polyethylene powder to be purchased ? ? ? ? ? Cost of required finishing kits ? ? ? ? ? Total costs for direct materials ? ? ? ? ? CREATIVE DESIGNS Direct Labor Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Units to be produced Value Value Value Value ? Number of hours of more skilled labor/unit x 2 x 2 x 2 x 2 x 2 Total number of hours of more skilled labor ? ? ? ? ? Hourly rate for more skilled labor x $15 x $15 x $15 x $15 x $15 Total cost of more skilled labor ? ? ? ? ? Units to be produced Value Value Value Value ? Number of hours of less skilled labor/unit x 3 x 3 x 3 x 3 x 3 Total number of hours of less skilled labor ? ? ? ? ? Hourly rate for less skilled labor x $12 x $12 x $12 x $12 x $12 Total cost of less skilled labor ? ? ? ? ? Total cost for direct labor ? ? ? ? ? CREATIVE DESIGNS Manufacturing Overhead Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Total costs for direct labor Value Value Value Value ? Manufacturing overhead rate per direct labor dollar x 150% x 150% x 150% x 150% x 150% Manufacturing overhead costs ? ? ? ? ? CREATIVE DESIGNS Selling and Administrative Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Expected unit sales Value Value Value Value ? Variable selling and administrative costs @ $45/unit ? ? ? ? ? Fixed selling and administrative costs Value Value Value Value ? Total selling and administrative costs ? ? ? ? ? After you have completed CD23 consider the following additional question. 1. Assume that each kayak requires 55 pounds of polyethylene powder and that ending inventory of polyethylene powder changed to 20% of the amount needed for production in the next quarter. Show the impact of these changes on the budgets. CD23 Creative Designs Diane Buswell is preparing the 2017 budget for one of Creative Design's rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2017. Quarter 1 1,000 kayaks Quarter 2 1,500 kayaks Quarter 3 750 kayaks Quarter 4 750 kayaks Creative Designs' policy is to have finished goods ending inventory in a quarter equal to 20% of the next quarter's anticipated sales. Preliminary sales projections for 2018 are 1,100 units for the first quarter and 1,500 units for the second quarter. Ending inventory of finished goods at December 31, 2016, will be 200 rotomolded kayaks. Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2016 is 19,400 pounds. The finishing kits can be assembled as they are needed. As a result, Creative Designs does not maintain a significant inventory of the finished kits. The polyethylene powder used in these kayaks cost $1.50 per pound, and the finishing kits cost $170 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type II employees. The type I employees are paid $15 per hour, and the type II employees are paid $12 per hour. Selling and administrative expenses for this line are expected to be $45 per unit sold plus $7,500 per quarter. Manufacturing overhead is assigned at 150% of labor costs. Instructions Prepare the production budget, direct materials budget, direct labor budget, manufacturing overhead budget, and selling and administrative budget for this product line by quarter and in total for 2017. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . CREATIVE DESIGNS Production Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Expected unit sales Value Value Value Value ? Add: desired ending finished goods units ? ? ? ? ? Total required units ? ? ? ? ? Less: beginning finished goods units ? Value Value Value ? Required production units ? ? ? ? ? CREATIVE DESIGNS Direct Materials Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Units to be produced Value Value Value Value ? Pounds of polyethylene powder per unit x 54 lbs. x 54 lbs. x 54 lbs. x 54 lbs. x 54 lbs. Total pounds needed for production ? ? ? ? ? Add: desired ending inventory of powder Value Value Value Value ? Total pounds of powder required ? ? ? ? ? Less: beginning inventory of powder Value Value Value Value ? Pounds of polyethylene powder to be purchased ? ? ? ? ? Cost per pound x $1.50 x $1.50 x $1.50 x $1.50 x $1.50 Cost of polyethylene powder to be purchased ? ? ? ? ? Cost of required finishing kits ? ? ? ? ? Total costs for direct materials ? ? ? ? ? CREATIVE DESIGNS Direct Labor Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Units to be produced Value Value Value Value ? Number of hours of more skilled labor/unit x 2 x 2 x 2 x 2 x 2 Total number of hours of more skilled labor ? ? ? ? ? Hourly rate for more skilled labor x $15 x $15 x $15 x $15 x $15 Total cost of more skilled labor ? ? ? ? ? Units to be produced Value Value Value Value ? Number of hours of less skilled labor/unit x 3 x 3 x 3 x 3 x 3 Total number of hours of less skilled labor ? ? ? ? ? Hourly rate for less skilled labor x $12 x $12 x $12 x $12 x $12 Total cost of less skilled labor ? ? ? ? ? Total cost for direct labor ? ? ? ? ? CREATIVE DESIGNS Manufacturing Overhead Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Total costs for direct labor Value Value Value Value ? Manufacturing overhead rate per direct labor dollar x 150% x 150% x 150% x 150% x 150% Manufacturing overhead costs ? ? ? ? ? CREATIVE DESIGNS Selling and Administrative Budget For the Year Ending December 31, 2017 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Expected unit sales Value Value Value Value ? Variable selling and administrative costs @ $45/unit ? ? ? ? ? Fixed selling and administrative costs Value Value Value Value ? Total selling and administrative costs ? ? ? ? ? After you have completed CD23 consider the following additional question. 1. Assume that each kayak requires 55 pounds of polyethylene powder and that ending inventory of polyethylene powder changed to 20% of the amount needed for production in the next quarter. Show the impact of these changes on the budgets.Explanation / Answer
Production Budget
For the year ended 31st december 2017
DIrect Materials Budget
For the year ended december 31st, 2017
*Production finished goods units for Quarter 1, 2018 = 1100 + (20%*1500) - 220 = 1180 units
Raw Material Required = 1180*54 = 63720 pounds
Closing stock for Qtr 4, 2017 = 25% of 63720 = 15930 pounds
Direct Labor Budget
For the year ended december 31st, 2017
Manufacturing Overhead Budget
For the year ended 31st december 2017
Selling and administrative budget
for the year ended 31st dec, 2017
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Expected Unit Sales 1000 1500 750 750 4000 Add: desired ending finished goods units 300 150 150 220 820 Total required units 1300 1650 900 970 4820 Less: beginning finished goods units -200 -300 -150 -150 -800 Required production units 1100 1350 750 820 4020