PART 1: Consider the following data in preparing Ballarat Furniture Company's budget for 2013:
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Product specification for each table for 2013
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Direct Materials
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Particle Board (PB)
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9 board feet (bf)per table
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Red Oak (RO)
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10 board feet (bf) per table
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Direct Manufacturing Labour
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Laminating labour
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0.25 hours per table
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Machining labour
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3.75 hours per table
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Inventory information for 2013
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Beginning Inventory
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TargetEnding Inventory
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PB
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20,000 bf
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18,000bf
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RO
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25,000 bf
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22,000 bf
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Finished goods - tables (units)
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5,000
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3,000
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Sales forecast for 2013
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Sales volume
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52,000 tables
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Sales price
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$392 per table
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Cost information:
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2012
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2013
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PB per board feet
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$3.90
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$4.00
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RO per board feet
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$5.80
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$6.00
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Laminating labour per hour
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$24.00
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$25.00
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Machining labour per hour
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$29.00
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$30.00
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Variable manufacturing overhead costs
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$1,900,000
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Fixed manufacturing overhead costs
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$1,600,000
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Manufacturing overhead application base
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Expected Direct Labour hours
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Inventoriable (manufacturing) cost per table
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$275
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In addition to the above, the following selling and administrative expenses are expected for 2013:
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Salaries of Sales personnel
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$555,760
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Marketing
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$1, 920,720
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Distribution
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$729,600
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Customer service
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$504,992
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Administrative
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$440,768
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Required:
Prepare an annual budget for Ballarat Furniture Company for 2013. Assume an income tax rate of 40 percent. Include the following schedules:
a. Sales budget
b. Production budget (in units)
c. Direct materials usage budget (in units and in dollars)
d. Direct labour budget
e. Budgeted income statement.
PART 2
Three readings on Budgeting posted on Moodle.
Critically review the above. Do you agree, partly agree or disagree with the issues raised in the above? Give your views on the issues that are raised in a, b and c.