Non-manufacturing fixed costs

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Reference no: EM13134061

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: 
Please go to your Moodle site and access the 6-papers on budgeting. 
Write a critical review of the above papers.

Reference no: EM13134061

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