COMPANY INFORMATION: EXHIBITON FURNITURE
Exhibition Furniture is a desk manufacturer, has been operating in Sydney for 12 years. It makes executive desks i.e. the Chairman desks. In spring 2017, Exhibition furniture 's management accountant prepares to arrange budgets for 2018. The following data are gathered to prepare the annual budget :
Materials and Labour requirements
Direct materials
Oak tops 3 squaremetres per desk
Oak legs 4 per desk
Direct manufacturing labour 3 hours per desk
Exhibition furniture's CEO expect to sell 2,000 desks during 2018 at an estimated retail price of $ 800 per desk. Moreover, the CEO expects 2018 beginning inventory of 200 desks, and only 300 desks are in stock at the end of 2018.
Direct material inventories :
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Beginning Inventory 1/1/2018
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Ending Inventory 31/1212018
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Oak tops
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40
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24
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Oak legs
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100
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80
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Manufacturing overhead (fixed and variable) is allocated to each desk on the basis of budgeted direct manufacturing labour hours per desk. The budgeted variable manufacturing overhead rate for 2018 is $20 per direct manufacturing labor hour. The budgeted fixed manufacturing overhead is $50,000. Variable marketing costs are allocated at the rate $100 per sales visit. The marketing plan calls for 20 visits during 2018. There are $10,000 in fixed non- manufacturing cost budgeted for 2018.
Other data included :
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2017 unit price
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2018 unit price
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Oak tops
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$100 per squaremetres
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$120 per squaremetres
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Oak legs
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$ 5 per leg
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$ 7 per leg
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Direct manufacturing labour
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$ 50 per hour
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$ 55 per hour
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The inventoriable unit cost for ending finished goods inven ory on 31 December 2017 is $4,000, Exhibition Furniture uses FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.
Budgeted balances at 31 December 2018 in the selected accounts are :
Cash $20,000
Property Plant and Equipment (net) 550,000
Current Liabilities 30,000
Non-current liabilities 59,340
Shareholders' equity 650,000
Part
Answer the following questions
a. Prepare the 2018 revenue budgets (in dollar)
b. Prepare the production budget (in units)
c. Prepare the direct materials usage and purchase budgets for 2018
d. Prepare the direct manufacturing labour budget for 2018
e. Prepare the manufacturing overhead budget for 2018
f. What is the budgeted manufacturing overhead rate for 2018
g. What is the budgeted manufacturing overhead cot per output unit in 2018
h. Calculate the unit cost of desk in closing inventory on 31 December 2018
i. Prepare the ending inventory budget for both direct materials and finished goods for 2018
j. Prepare cost of good sold budget for 2018
k. Prepare the budgeted income statement for the year ending 31 December 2018 1. Prepare the budgeted balance sheet as of 31 December 2018
Part 2
Suppose Exhibition Furniture decides to incorporate continues improvement into its budgeting process. You are required to provide recommendation (memo) to the CEO two areas where Exhibition Furniture could incorporate continues improvement into the budget schedules in requirement I.
To answer this question, you are required to provide minimum 400 words recommendation to the CEO. Apply your comprehensive knowledge in management accounting such as knowledge about company strategies in reducing cost in materials, labour and manufacturing overhead.
You may also include analysis of non-manufacturing cost such as marketing cost and consider the companystrategic planning to increase sales or profit targets. Please choose the best strategy among those strategies and provide your reasons. Please put some appropriate references.