Chapter 6, Problem 6.35P

Budget schedules for a manufacturer. Hale Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:

• Broncos, with red blankets and the Broncos logo
• Rams, with black blankets and the Rams logo

Also, the black blankets are slightly larger than the red blankets.

The budgeted direct-cost inputs for each product in 2017 are as follows:

	Broncos Blanket	Rams Blanket
Red wool fabric	5 yards	0 yards
Black wool fabric	0	6
Broncos logo patches	1	0
Rams logo patches	0	1
Direct manufacturing labor	4 hours	5 hours

Unit data pertaining to the direct materials for March 2017 are as follows:

Actual Beginning Direct Materials Inventory (3/1/2017)

	Broncos Blanket	Rams Blanket
Red wool fabric	40 yards	0 yards
Black wool fabric	0	20
Broncos logo patches	50	0
Rams logo patches	0	65

Target Ending Direct Materials Inventory (3/31/2017)

	Broncos Blanket	Rams Blanket
Red wool fabric	30 yards	0 yards
Black wool fabric	0	20
Broncos logo patches	30	0
Rams logo patches	0	30

Unit cost data for direct-cost inputs pertaining to February 2017 and March 2017 are as follows:

	February 2017 (actual)	March 2017 (budgeted)
Red wool fabric (per yard)	$10	$11
Black wool fabric (per yard)	14	13
Broncos logo patches (per patch)	8	8
Rams logo patches (per patch)	7	9
Manufacturing labor cost per hour	27	28

Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for March 2017 is $17 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2017 is $14,625. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods Data relating to finished-goods inventory for March 2017 are as follows:

	Broncos Blankets	Rams Blankets
Beginning inventory in units	14	19
Beginning inventory in dollars (cost)	$1,960	$2,945
Target ending inventory in units	24	29

Budgeted sales for March 2017 are 140 units of the Broncos blankets and 195 units of the Rams blankets. The budgeted selling prices per unit in March 2017 are $305 for the Broncos blankets and $378 for the Rams blankets. Assume the following in your answer:

• Work-in-process inventories are negligible and ignored.
• Direct materials inventory and finished-goods inventory are costed using the FIFO method.
• Unit costs of direct materials purchased and finished goods are constant in March 2017.

1. 1. Prepare the following budgets for March 2017:

Required

1. a. Revenues budget
2. b. Production budget in units
3. c. Direct material usage budget and direct materials purchases budget
4. d. Direct manufacturing labor costs budget
5. e. Manufacturing overhead costs budget
6. f. Ending inventories budget (direct materials and finished goods)
7. g. Cost of goods sold budget
8. 2. Suppose Hale Specialties decides to incorporate continuous improvement into its budgeting process. Describe two areas where it could incorporate continuous improvement into the budget schedules in requirement 1.