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Budget schedules

Sierra Furniture is an elite desk manufacturer. It makes two products:
Executive desks 3 x 5 oak desks
Chairman desks 6 x 4 red oak desks

The budgeted direct-cost inputs for each product in 2009 are:

Executive Line Chairman Line
Oak top 16 square ft 0
Red oak top 0 25 square feet
Oak legs 4 0
Red oak legs 0 4
Direct mfg labor 3 hours 5 hours

Unit data pertaining to the direct materials for March 2009 are:

Actual Beginning Direct Materials Inventory (3/1/2009)

Executive Line Chairman Line
Oak top (square ft) 320 0
Red oak top (square ft) 0 150
Oak legs 100 0
Red oak legs 0 40

Target Ending Direct Materials Inventory (3/31/2009)

Executive Line Chairman Line
Oak top (square feet) 192 0
Red oak top (square feet) 0 200
Oak legs 80 0
Red oak legs 0 44

Unit cost data for direct-cost inputs pertaining to February 2009 and March 2009 are:

2/2009 (actual) 3/2009 (budgeted)
Oak top (per square ft) $18 $20
Red oak top (per square ft) $23 $25
Oak legs (per leg) $11 $12
Red Oak legs (per leg) $17 $18
Mfg Labor Cost (per hour) $30 $30

Manufacturing overhead (both variable and fixed) is allocated to each desk on the basis of budgeted direct manufacturing labor-hours per desk. The budgeted variable manufacturing overhead rate for March 2009 is $35 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for March 2009 is $42,500. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.

Data relating to finished goods inventory for March 2009 are:

Executive Line Chairman Line
Beginning Inventory (units) 20 5
Beginning Inventory ($ cost) $10,480 $4,850
Target End Inventory (units) 30 15

Budgeted sales for March 2009 are 740 units of the executive line and 390 units of the chairman line. The budgeted selling prices per unit in March 2009 are $1,020 for the executive-line desk and $1,600 for the chairman-line desk. 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 March 2009.

1. Prepare the following budgets for March 2009:

a. Revenues budget
b. Production budget in units
c. Direct material usage budget and direct material purchases budget
d. Direct manufacturing labor budget
e. Manufacturing overhead budget
f. Ending inventories budget (direct materials and finished goods)
g. Cost of good sold budget

2. Suppose Sierra Furniture decides to incorporate continuous improvement into its budgeting process. Describe two areas where Sierra could incorporate continuous improvement into the budget schedules in requirement 1.

Solution Summary

The solution explains how to prepare the required budget schedules

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