Part A Furniture Specialties is a company that make two types of dining tables:
ID: 2535873 • Letter: P
Question
Part A
Furniture Specialties is a company that make two types of dining tables: Simple and Futuristic. There are two types of direct materials: Pine and Mahogany woods. Direct manufacturing labour workers are hired on an hourly basis; no overtime is worked. In terms of manufacturing overhead costs, there are two manufacturing overhead cost pools and two cost drivers. The two manufacturing overhead cost pools are manufacturing operations overhead and machine setup overhead. The cost drivers for manufacturing overhead are: direct manufacturing labour-hours for manufacturing operations overhead cost and setup labour-hours for machine setup overhead cost. Nonmanufacturing costs consist of product design, marketing, and distribution costs.
The following data are available for the 2018 budget:
Direct Materials Rate
Pine
$ 9 per meter square (m2)
Mahogany
$13 per meter square (m2)
Direct Manufacturing labour rate
$25 per hour
Quantity of Material for Each Product
Simple Table
Futuristic Table
Pine
14 m2
14 m2
Mahogany
8 m2
10 m2
Direct Material Labour
6 hours
8 hours
Products
Simple Table
Futuristic Table
Expected Sales for 2018 (in units)
55,000
15,000
Selling Price
$ 750
$ 950
Target ending inventory in units
12,000
500
Beginning inventory in units
1,000
500
Beginning inventory in dollars
$ 400,000
$ 275,000
Direct materials inventory
Pine
Mahogany
Beginning inventory
85,000 m2
65,000 m2
Target ending inventory
90,000 m2
25,000 m2
Data on Manufacturing Overhead Cost
Manufacturing Operations Overhead cost (in capacity of 350,000 direct manufacturing labour-hours)
Variable manufacturing operation overhead costs (per direct manufacturing labour-hours)
Supplies
Indirect manufacturing labour
Power (support department costs)
Maintenance (support department costs)
Total variable manufacturing operation overhead cost
$ 4.50
6.50
7.00
3.50
$ 21.50
Fixed manufacturing operation overhead cost
Depreciation
Supervision
Power (support department costs)
Maintenance (support department costs)
Total fixed manufacturing operation overhead cost
$ 1,400,000
420,000
725,000
430,000
$ 2,975,000
Machine Setup Overhead Costs (in capacity of 15,150 setup labour-hours)
Variable machine setup overhead cost (per setup labour-hours)
Supplies
Indirect manufacturing labour
Power (support department)
Total variable machine setup overhead cost
$ 25
55
10
$ 90
Fixed machine setup overhead cost
Depreciation
Supervision
Power (Support department cost)
Total fixed machine setup overhead cost
$ 605,000
1,040,000
21,500
$ 1,666,500
0.2 hour of setup labour-hour is allocated to make one unit of simple table and 0.3 hour of setup labour-hour is allocated for futuristic table
Non-manufacturing Cost
Product Design Cost (fixed)
$ 1,100,000
Marketing Cost
Fixed marketing cost
Variable marketing cost is equals the 7.5% of revenues
$ 1,350,000
Distribution Cost
Fixed distribution cost
Variable distribution cost is $2 per cubic feet of table sold and shipped
Simple table 20 cubic feet per table sold and shipped
Futuristic table 25 cubic feet per table sold and shipped
$ 1,700,000
Required:
Based on the above information provided by the various department managers, prepare the following budgets:
E. Direct Manufacturing Labour Cost budget (4 points)
Direct Materials Rate
Pine
$ 9 per meter square (m2)
Mahogany
$13 per meter square (m2)
Direct Manufacturing labour rate
$25 per hour
Explanation / Answer
Production of simple table = sales +ending inventory -beginning
55000+12000-1000
66000
Futuristic table :15000+500-500 =15000
Direct manufacturing labor cost budget simple Futuristic Total unit produced 66000 15000 Hours per unit 6 8 Total hours required for production 66000*6=396000 120000 516000 Rate per hour 25 Direct labor cost 12,900,000 [516000*25]