Part A

Perpetual Clocks is a manufacturer of clocks. It makes two products:

  • Homeware Clocks— medium wall clocks made from Plastics.
  • Custom Clocks— large free-standing clocks made from Tasmanian oak


The budgeted direct cost inputs for each product in 2018 are:


Homeware line Custom line
Plastic framing 4 square metres 0
Tasmanian oak framing 0 10 square metres
Plastic links 8 0
Tasmanian oak links 0 8
Direct manufacturing labour 6 hours 10 hours


Unit data pertaining to the direct materials for March 2018 are:

Actual beginning direct materials inventory (1 March 2018)

Homeware Line Custom Line
Plastic framing (square metres) 80  0
Tasmanian oak framing (square metres)   0 60
Plastic links 200  0
Tasmanian oak links    0 80


Target ending direct materials inventory (31 March 2018)

Homeware Line Custom Line
Plastic framing (square metres) 48  0
Tasmanian oak framing (square metres)  0 80
Plastic links 160  0
Tasmanian oak links  0 88


Unit cost data for direct cost inputs pertaining to February 2018 and March 2018 are:


February (actual) $ March (budgeted) $
Plastic framing (per square metre) 288 320
Tasmanian oak framing (per square metre)   230   250
Plastic links (per link)    22   24
Tasmanian oak links (per link)    34   36
Manufacturing labour cost per hour    60   60


Manufacturing overhead (both variable and fixed) is allocated to each clock on the basis of budgeted direct manufacturing labour-hours per clock. The budgeted variable manufacturing overhead rate for March 2018 is $70 per direct manufacturing labour-hour. The budgeted fixed manufacturing overhead for March 2018 is $85 000. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.

Data relating to finished goods inventory for March 2018 are:

Homeware Line Custom Line
Beginning inventory in units        40        10
Beginning inventory in dollars (cost) $20 960 $9 700
Target ending inventory in units        60       30


Budgeted sales for March 2018 are 1,480 units of the Homeware line and 780 units of the Custom line. The budgeted selling prices per unit in March 2018 are $2,040 for the Homeware-line clock and $3,200 for the Custom-line desk. 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 2018.



  1. Prepare the following budgets for March 2018:
    1. revenues budget
    2. production budget in units
    3. direct materials usage budget
    4. direct materials purchases budget
    5. direct manufacturing labour budget
    6. manufacturing overhead budget
    7. ending inventories budget (direct materials and finished goods)
    8. cost of goods sold budget.

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