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Sweden Ltd manufactures cabinets. You work in the accounting department and have been tasked with preparing the Budget for the next month.

Sweden makes two products:

Premium cabinets - large cabinets with mirrors

De Luxe cabinets - medium sized cabinets with an innovative shelving solution and mirrors

Direct manufacturing labour is 3 hours for the Premium cabinet and 5 hours for the De Luxe. The budgeted direct material usage for each product in 2020 is:

Square metres Mirrors Softwood

Premium De Luxe 2 3 1 5

Opening direct materials inventory for January 2020 is:

Square metres Mirrors Softwood

Premium De Luxe 40 15

10 30

Page 1

Kaplan Business School Assessment Outline

Target ending direct materials inventory (January 31) is:

Square metres Mirrors Softwood

Premium De Luxe 24 20

6 40

Unit cost data is expected to be the same for January as it was in December 2019 for labour and all materials as below:

December 2019 (actual) January 2020 (budgeted) $$

Mirrors per square metre 160 160 Softwood per square metre 125 125 Manufacturing labour cost per hour 30 30

Manufacturing overhead (both variable and fixed) is allocated to each cabinet on the basis of budgeted direct manufacturing labour hours.

The budgeted variable manufacturing overhead rate for January 2020 is $35 per direct manufacturing labour-hour.

The budgeted fixed manufacturing overhead for the month is $42,500. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods on the basis of direct manufacturing labour-hours.

Data relating to finished goods inventory for January 2020 are:

Opening Inventory (units) Opening Inventory (dollars) Target Ending Inventory

Premium De Luxe 20 5

$10,840 $4,850 30 15

Budgeted sales for January 2020 are 740 units of the premium and 390 units of the De Luxe. The budgeted selling prices per unit in January 2020 are $1,020 for the Premium and $1,600 for the De Luxe.

For the purposes of calculating COGS and Closing Inventory of finished goods, cost per unit for January 2020 is $670 for the Premium cabinet and $1,480 for the De Luxe cabinet.

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 January 2020.

Page 2

Kaplan Business School Assessment Outline

REQUIRED:

Prepare the following budgets for January 2020:

1. a)Revenues budget (2 Marks)
2. b)Production budget in units (2 Marks)
3. c)Direct materials usage budget and direct materials purchases budget (both budgets in units and $)
4. d)Direct manufacturing labour budget
5. e)Manufacturing overhead budget
6. f)Ending inventories budget (direct materials and finished goods)
7. g)Cost of goods sold budget

For each budget, prepare by product (Premium and De Luxe) and in total.

(4 Marks) (2 Marks) (2 Marks) (2 Marks) (2 Marks)

Format of the spreadsheet makes it easy to read and distinguishes clearly between the input and output cells (2 Marks)

Excel spreadsheets designed in a way that enables different input data to be entered and automatically change the output data (2 Marks)

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