Relevant information and assumptions: The DecorIdeas Company manufactures hand-crafted natural wood display cupboards. Currently the company makes only one size of display cupboard, which is 60-inch height, 48-inch width, and 19-inch depth; and has 6 shelves. The final
Relevant information and assumptions:
The DecorIdeas Company manufactures hand-crafted natural wood display
cupboards. Currently the company makes only one size of display cupboard, which is
60-inch height, 48-inch width, and 19-inch depth; and has 6 shelves. The final
product consists of a routed, sanded, assembled, and stained oak wood cupboard.
Direct materials include oak shelving wood and hickory plywood backing board.
Other materials, such as wood screws, sand paper, stain, wood glue, and packaging,
are treated as indirect materials. DecorIdeas is preparing budgets for the fourth quarter ending December 31, 2022.
Prepare budgets by month for October, November, and December, and a total budget for the quarter. The previous year’s sales (2021/22) for the corresponding period were:
October 2,000 display cupboards
November 2,800 display cupboards
December 4,000 display cupboards
January 4,400 display cupboards
February 3,600 display cupboards
The company expects the above volume of display cupboard sales to increase by 15%
for the period October 2022 – February 2023. The budgeted selling price for 2022 is
$785.00 per display cupboard. The company expects 5% of its sales to be cash
(COD) sales. The remaining 95% of sales will be made on credit
The company desires to have finished goods inventory on hand at the end of each
month equal to 15 percent of the following month's budgeted unit sales. On
September 30, 2022, there were 450 display cupboards on hand. (Note, an estimate of
sales in January is required in order to complete the production budget for
December).
Relevant Question:
The display cupboards require two direct materials: oak shelving wood and hickory
plywood backing board.
Oak shelving wood:
Thirty (30) feet of 12x1 oak shelving wood are required for each cupboard produced.
Management desires to have materials on hand at the end of each month equal to 10
percent of the following month's cupboard production needs. The beginning
inventory of oak wood, October 2022, was 10,150 feet of wood. Oak wood is
expected to cost $5.00 per foot.
Hickory plywood backing board:
Hickory plywood backing board is purchased by the sheet and 2 backing boards can
be cut from each sheet. Management desires to have plywood on hand at the end of
each month equal to 15 percent of the following month's production needs. The
beginning inventory of plywood, October 2022, was 100 sheets. Hickory plywood is
expected to cost $45 per sheet. (Note, budgeted production in January is required in
order to complete the direct materials budget for December. Also, use the @ROUND
function to round up to the nearest whole number the number of sheets of plywood
to purchase – “DM quantities to purchase”).
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Could you include the calculations for the direct materials budget, please? especially for the closing stock? thank you!/
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