Diane Buswell is preparing the 2020 budget for one of Current Designs’ rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2020. Quarter 1 2,500 kayaks Quarter 2 3,200 kayaks Quarter 3 2,150 kayaks Quarter 4 2,150 kayaks Current Designs’ policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter’s anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 3,200 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 750 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, 2019, is 20,000 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits. The polyethylene powder used in these kayaks costs $1.00 per pound, and the finishing kits cost $180 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 $16 per hour, and the type II employees are paid $13 per hour. Selling and administrative expenses for this line are expected to be $47 per unit sold plus $8,300 per quarter. Manufacturing overhead is assigned at 160% of labor costs.
Diane Buswell is preparing the 2020 budget for one of Current Designs’ rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2020. Quarter 1 2,500 kayaks Quarter 2 3,200 kayaks Quarter 3 2,150 kayaks Quarter 4 2,150 kayaks Current Designs’ policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter’s anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 3,200 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 750 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, 2019, is 20,000 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits. The polyethylene powder used in these kayaks costs $1.00 per pound, and the finishing kits cost $180 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 $16 per hour, and the type II employees are paid $13 per hour. Selling and administrative expenses for this line are expected to be $47 per unit sold plus $8,300 per quarter. Manufacturing overhead is assigned at 160% of labor costs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Current Designs 9 (Part Level Submission)
Diane Buswell is preparing the 2020 budget for one of Current Designs’ rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2020.
Current Designs’ policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter’s anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 3,200 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 750 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, 2019, is 20,000 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.00 per pound, and the finishing kits cost $180 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 $16 per hour, and the type II employees are paid $13 per hour.
Selling and administrative expenses for this line are expected to be $47 per unit sold plus $8,300 per quarter. Manufacturingoverhead is assigned at 160% of labor costs.
| Quarter 1 | 2,500 | kayaks | |
| Quarter 2 | 3,200 | kayaks | |
| Quarter 3 | 2,150 | kayaks | |
| Quarter 4 | 2,150 | kayaks |
Current Designs’ policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter’s anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 3,200 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 750 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, 2019, is 20,000 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.00 per pound, and the finishing kits cost $180 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 $16 per hour, and the type II employees are paid $13 per hour.
Selling and administrative expenses for this line are expected to be $47 per unit sold plus $8,300 per quarter. Manufacturing
Transcribed Image Text:Prepare the direct materials budget for this product line by quarter and in total for 2020. (Round cost per pound to 2 decimal places, e.g. 1.25 and other answers to 0 decimal places, e.g. 125.)
CURRENT DESIGNS
Direct Materials Budget-Polyethylene Powder
For the Year Ending December 31, 2020
Quarter
Q1
Q2
Q3
Q4
Total
Units to be Produced
2710
2885
2150
1835
Pounds of Polyethylene Powder Per Unit
54
54
54
54
Total Pounds Needed for Production
146340
155790
116100
99090
시
Desired Ending Inventory of Powder
38948
29025
24773
23355
Total Pounds of Powder Required
185288
184815
140873
122445
Less v
Beginning Inventory of Powder
-20000
-38947.5
-29025
-23355
Pounds of Polyethylene Powder to be Purchased v
145868
97673
165288
111848
Cost Per Pound
1.00
1.00
1.00
1.00
165288
145868
111848
111848
Cost of Polyethylene Powder to be Purchased
180
180
180
180
Cost of Required Finishing Kits
165468
146048
112028
97853
521397
Total Costs for Direct Materials
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