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.
Required
- Prepare the following budgets for March 2018:
- revenues budget
- production budget in units
- direct materials usage budget
- direct materials purchases budget
- direct manufacturing labour budget
- manufacturing overhead budget
- ending inventories budget (direct materials and finished goods)
- cost of goods sold budget.
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