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.


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:


  1. Calculate equivalent units of transferred-in costs, direct materials, and conversion costs.
  2. Summarize total costs to account for, and calculate the cost per equivalent unit for transferred-in costs, direct materials, and conversion costs.
  3. Assign total costs to units completed (and transferred out) and to units in ending work in process.


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