The current inventory of blue rugs is 60,000 units and management would like to see an increase of inventory to 105,000 units. Production will occur evenly throughout the year. Inventory level= Labor costs per hour and the other costs are not expected to change during the year. However, the cotton cost per yard will increase by 20% at the start of the coming budget period. Rander Manufacturing Company manufactures blue rugs. The company needs to prepare a budget for the coming year. The following costs and other data apply to rug production: Direct materials per rug 1.0 yard cotton at $3 per yard 0.2 yards canvas finish at $10 per yard Direct labor per rug: 0.5 hour at $16 per hour Overhead per rug Indirect labor $0.5 Indirect materials 0.15 Power Machine costs Lease costs 0.3 1.25 0.8 Total overhead per unit $3.0 Fixed costs include the machine costs and building lease costs. The fixed cost rate is calculated based on a normal production of 300,000 units per vear Other overhead costs include indirect labor, indirect materials and power costs, which are variable. The manufacturing capacity is 375,000 units per year. The expected sales volume of blue rugs is 270,000 during the coming budget period. and canvas are expected to remain the same throughout the year. The company doesn't have work-in-process inventory Required 1). Prepare a production budget 2). Calculate the materials, labor, and overhead costs for the comning year. ALT+FN+F10 (Mac).
The current inventory of blue rugs is 60,000 units and management would like to see an increase of inventory to 105,000 units. Production will occur evenly throughout the year. Inventory level= Labor costs per hour and the other costs are not expected to change during the year. However, the cotton cost per yard will increase by 20% at the start of the coming budget period. Rander Manufacturing Company manufactures blue rugs. The company needs to prepare a budget for the coming year. The following costs and other data apply to rug production: Direct materials per rug 1.0 yard cotton at $3 per yard 0.2 yards canvas finish at $10 per yard Direct labor per rug: 0.5 hour at $16 per hour Overhead per rug Indirect labor $0.5 Indirect materials 0.15 Power Machine costs Lease costs 0.3 1.25 0.8 Total overhead per unit $3.0 Fixed costs include the machine costs and building lease costs. The fixed cost rate is calculated based on a normal production of 300,000 units per vear Other overhead costs include indirect labor, indirect materials and power costs, which are variable. The manufacturing capacity is 375,000 units per year. The expected sales volume of blue rugs is 270,000 during the coming budget period. and canvas are expected to remain the same throughout the year. The company doesn't have work-in-process inventory Required 1). Prepare a production budget 2). Calculate the materials, labor, and overhead costs for the comning year. ALT+FN+F10 (Mac).
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.
Question
Transcribed Image Text:### Xander Manufacturing Company Budget Preparation for Blue Rugs
Xander Manufacturing Company manufactures blue rugs. The company needs to prepare a budget for the coming year. The following costs and other data apply to rug production:
#### Direct Materials Per Rug:
- **1.0 yard cotton at $3 per yard**
- **0.2 yards canvas finish at $10 per yard**
#### Direct Labor Per Rug:
- **0.5 hour at $16 per hour**
#### Overhead Per Rug:
- **Indirect labor:** $0.5
- **Indirect materials:** $0.15
- **Power:** $0.3
- **Machine costs:** $1.25
- **Lease costs:** $0.8
**Total overhead per unit:** $3.0
#### Notes:
- **Fixed costs** include the machine costs and building lease costs. The fixed cost rate is calculated based on a normal production of 300,000 units per year.
- Other overhead costs include indirect labor, indirect materials, and power costs, which are variable.
- The manufacturing capacity is 375,000 units per year.
- Labor costs per hour and the other costs are not expected to change during the year. However, the cotton cost per yard will increase by 20% at the start of the coming budget period.
- The expected sales volume of blue rugs is 270,000 during the coming budget period.
- The current inventory of blue rugs is 60,000 units and management would like to see an increase in inventory to 105,000 units. Production will occur evenly throughout the year. Inventory levels for cotton and canvas are expected to remain the same throughout the year. The company doesn't have work-in-process inventory.
### Required:
1. **Prepare a production budget**
2. **Calculate the materials, labor, and overhead costs for the coming year**
### Additional Information:
The detailed table includes various cost components per rug, highlighted with specific numerical values such as material costs, labor costs, and overheads. The table helps in understanding the breakdown of costs for accurate budget preparation and cost control.
**Table Summary**:
- **Direct materials, labor, and overhead costs** are broken down to give a clear view of the cost structure per rug, assisting in the overall calculation of the production budget.
This structured approach ensures all aspects of costs are considered for the most accurate budget and resource allocation.
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