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PART 1: George Ltd manufactures two types of coils used in electric motors. The two types are: C20 and D40. They both require plastic and metal. Information for the two products for the month of April is given in the following tables: Input prices Direct materials Plastic $4 per kilogram Metal $3 per kilogram Direct manufacturing labour $10 per direct manufacturing labour hour Input quantities per unit of output C20 D40 Direct materials Plastic 4 kilograms 6 kilograms Metal 0.5 kilogram 1 kilogram Direct manufacturing labour-hours (DMLH) 3 hours 5 hours Machine-hours (MH) 10 MH 18MH Inventory information, direct materials Plastic Metal Beginning inventory 250 kilograms 60 kilograms Target ending inventory 380 kilograms 55 kilograms Cost of beginning inventory $950 $180 The company accounts for direct materials using a FIFO cost flow assumption. Sales and inventory information, finished goods C20 D40 Expected sales in units 500 300 Selling price $160 $250 Target ending inventory in units 35 15 Beginning inventory in units 15 30 Beginning inventory in dollars $1500 $5580 The company uses: • a FIFO cost flow assumption for finished goods inventory. • an activity-based costing system and classifies overhead into three activity pools: Set-up, Processing and Inspection. Activity rates for these activities are $100 per set-up hour. $5 per machine-hour and $16 per inspection-hour, respectively. Other information is as follows: Cost driver information C20 D40 Number of units per batch 20 15 Set-up time per batch 1.5 hours 1.75 hours Inspection time per batch 0.5 hour 0.6 hour Non-manufacturing fixed costs for March equal $36,000 of which half are salaries. Salaries are expected to increase by 5% in April. The only variable non-manufacturing cost is sales commission equal to 1% of sales revenue. Required: Prepare the following for April: a. Sales budget b. Production budget in units c. Direct material usage budget and direct material purchases budget d. Manufacturing overhead cost budgets for each of the three activities e. Budgeted income statement (ignore income taxes) PART 2: Write a critical review of the above papers. Reading material is attached in the file.
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