Question 1
Cottesloe Ltd manufactures and sells two products: Thingone and Thingtwo. In July 2014, Cottesloe Ltd’s budget department gathered the following data to prepare budgets for 2015:
2015 Projected Sales
| Product | Units | Price |
| Thingone | 60,000 | $165 |
| Thingtwo | 40,000 | $250 |
2015 Inventories in Units
| Expected Target | ||
| Product | January 1, 2015 | December 31, 2015 |
| Thingone | 20,000 | 25,000 |
| Thingtwo | 8,000 | 9,000 |
The following direct materials are used in the two products:
| Amount used per unit | |||
| Direct Material | Unit | Thingone | Thingtwo |
| A | Kilogram | 4 | 5 |
| B | Kilogram | 2 | 3 |
| C | Each | 0 | 1 |
Projected data for 2015 with respect to direct materials are as follows:
| Direct material | Anticipated purchase price | Expected inventories January 1, 2015 | Target inventories December 31, 2015 |
| A | $12 | 32,000 kg | 36,000 kg |
| B | 5 | 29,000 kg | 32,000 kg |
| C | 3 | 6,000 units | 7,000 units |
Projected direct manufacturing labour requirements and rates for 2015 are as follows:
| Product | Hours per unit | Rate per hour |
| Thingone | 2 | $12 |
| Thingtwo | 3 | 16 |
Manufacturing overhead is allocated at the rate of $ 20 per direct manufacturing labour-hour.
Required
Based on the preceding projections and budget requirements for Thingone and Thingtwo, prepare the following budgets for 2015:
1. Revenues budget (in dollars)
2. Production budget (in units)
3. Direct material purchases budget (in kilograms)
4. Direct material purchases budget (in dollars)
5. Direct manufacturing labour budget (in dollars)
6. Budgeted finished goods inventory at December 31, 2015 (in dollars)
Question 2
Asaya Clothing, Inc., is a manufacturer of winter clothes. It has a knitting department and a finishing department. This exercise focuses on the finishing department. Direct materials are added at the end of the process. Conversion costs are added evenly during the process. Asaya uses the weighted-average method of process costing. The following information for June 2014 is available:
- Calculate equivalent units of transferred-in costs, direct materials, and conversion costs.
- Summarize total costs to account for, and calculate the cost per equivalent unit for transferred-in costs, direct materials, and conversion costs.
- Assign total costs to units completed (and transferred out) and to units in ending work in process.
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