Jun-33 (60 min.

) Comprehensive problem with ABC costing

Data given in problem:
Input Prices
Direct materials
$4.00 /lb
$3.00 /lb

Plastic
Metal
Direct manufacturing labor

$14.00 /DLH
Machine hours
Sales and inventory information Finished goods
Expected sales in units
Selling price
Target ending inventory in units
Beginning inventory in units
Beginning inventory in dollars

1 Revenue Budget for April

Units
Cat-allac
Dog-eriffic
Total

Selling Price
580
240

$190
$275

2 Production Budget For the Month of April

Budgeted unit sales

Add target ending finished goods inventory
Total required units
Deduct beginning finished goods inventory
Units of finished goods to be produced

Product
Cat-allac
Dog-eriffic
580
240
45
25
625
265
25
40
600
225

3a. Direct Material Usage Budget in Quantity and Dollars For the Month of April
Material
Plastic
Metal
Total
Physical Units Budget
Direct materials required for
Cat-allac (600 units 3 lbs. and 0.5 lb.)
1800
300 lbs.

Dog-errific (225 units 5 lbs. and 1 lb.)

Total quantity of direct material to be used

1125
2925

Cost Budget
Available from beginning direct materials inventory
(under a FIFO cost-flow assumption)
Plastic: 230 lbs. $3.80 per lb.
$874
Metal: 70 lbs. $3.20 per lb.
To be purchased this period
.
Plastic: (2,925 230) lbs.*$4
$10,780
Metal: (525 70) lbs. *$3
Direct materials to be used this period
$11,654

225 lbs.
525 lbs.

$224.00

$1,365

$1,589

$13,243

Direct Material Purchases Budget

For the Month of April
Material
Plastic
Physical Units Budget
To be used in production (requirement 3)
Add target ending inventory
Total requirements
Deduct beginning inventory
Purchases to be made
Cost Budget
Plastic: 3,095 lbs.
Metal: 520 lbs.
Purchases

Metal

2,925 lbs.
400 lbs.
3,325 lbs.
230 lbs.
3,095 lbs.

$12,380
______
$12,380

525
65
590
70
520

$1,560

$1,560

4. Direct Manufacturing Labor Costs Budget

For the Month of April

Cat-allac
Dog-errific
Total

Output Units ProducedDMLH

(requirement 2) per Unit
600
3
225
5

Total
Hours
1,800
1,125

5. Machine Setup Overhead

Units to be produced
Units per batch

Cat-allac
600
25

Dog-errific
225
13

Number of batches

24

Setup time per batch

1.25 hrs.

Total setup time

30

18
2

hrs.

36

Budgeted machine setup costs = $130 per setup hour

Processing Overhead
Budgeted machine-hours (MH) = (13 MH per unit 600 units) + (20 MH per unit 225 units)
= 7,800 MH + 4,500 MH = 12,300 MH
Budgeted processing costs = $5 per MH 12,300 MH

Inspection Overhead
Budgeted inspection-hours = (0.5
24
batches) + (0.6
18
batches)

= 12 + 10.8 = 22.8 inspection hrs.

Budgeted inspection costs = $20 per inspection hr.

22.8
inspection hours
Manufacturing Overhead Budget
For the Month of April

(FROM ABOVE)

Machine setup costs

Processing costs
Inspection costs
Total costs

$8,580
61,500
456
$70,536
6
Unit Costs of Ending Finished Goods Inventory
April 30, 20xx
Product
Cat-allac
Cost per
Unit of
Input

Plastic
Metal
Direct manufacturing labor

$4
3
14

Input per
Unit of
Output
3 lbs.
0.5 lbs.
3 hrs.

Machine setup
Processing
Inspection
Total

130
5
20

0.05 hrs. 1
13 MH
0.02 hr2

30 setup-hours 600 units = 0.05 hours per unit; 36 setup-hours 225 units = 0.16 hours per unit

12 inspection hours 600 units = 0.02 hours per unit; 10.8 inspection hours 225 units = 0.048 hours per unit

Ending Inventories Budget

April 30, 20xx
Quantity
Direct Materials
Plastic
Metals
Finished goods
Cat-allac
Dog-errific
Total ending inventory

Cost per unit

400
65

$4
3

45
25

$127.40
214.76

Total
$1,600
195

$5,733
5,369

Cost of Goods Sold Budget

For the Month of April, 20xx
Beginning finished goods inventory, April, 1
($2,500 + $7,440)
Direct materials used (requirement 3)

$9,940
$13,243

Direct manufacturing labor (requirement 4)

40,950

Manufacturing overhead (requirement 5)

70,536

Cost of goods manufactured

Cost of goods available for sale
Deduct: Ending finished goods inventory,
April 30 (reqmt. 6)
Cost of goods sold

124,729 (Note: No work-in-process to accou

134,669
11,102
$123,567

8
Nonmanufacturing Costs Budget
For the Month of April, 20xx
Salaries ($32,000 2
1.05)

Other fixed costs ($32,000 2)

Sales commissions ($176,200
1%)

Total nonmanufacturing costs

$16,800
16,000
1,762
$34,562

9
Budgeted Income Statement
For the Month of April, 20xx
Revenues
Cost of goods sold
Gross margin
Operating (nonmanufacturing) costs
Operating income

$176,200
123,567
52,633
34,562
$18,071

m with ABC costing

Input quantities per unit of ourtput
Cat-allac
Dog-eriffic
3
5
0.5
1
3
13

Cat-allac
580
$190
45
25
$2,500

Total
Revenues
$110,200
$66,000
$176,200

For the Month of April

5
20

Dog-eriffic
240
$275
25
40
$7,440

DM Inventory
BeginningCost of BITgt. Ending
230
$874
400
70
$224
65

Metal

Total

lbs.
lbs.
lbs.
lbs.
lbs.

$13,940

Hourly Wage
Rate
$14.00
$
$14.00
$

Dog-errific

Total
25,200
15,750
$40,950

Total

hrs.
hrs.

66 hrs.

30 per setup hour

66
hours

= $8,580

nit 225 units)

4,500 MH = 12,300 MH
= $61,500

= $456

d Goods Inventory
xx
Product

Cat-allac

Dog-errific
Input per
Total
$12.00
1.5
42

Unit of Output
5 lbs.
1 lb.
5 hrs.

Total
$20.00
3
70

6.5
65
0.4
$127.40

0.16 hr1
20 MH
0.048 hr.2

Total

$1,795

11,102
$12,897

ote: No work-in-process to account for)

20.8
100
0.96
$214.76

gt. Ending

Cash Budget
April 30, 20xx
Cash balance, April 1, 20xx

$5,200

Add receipts
Cash sales ($176,200 10%)
Credit card sales ($176,200 90% 98%)
Total cash available for needs (x)

17,620
155,408
$178,228

Deduct cash disbursements

Direct materials ($8,400 + $13,940 50%)
Direct manufacturing labor

$15,370 from purchases budget

40,950

Manufacturing overhead ($70,536 $22,500 depreciation)

48,036

Nonmanufacturing salaries

16,800

Sales commissions
Other nonmanufacturing fixed costs ($16,000 $12,500
deprn)
Machinery purchase
Income taxes
Total disbursements (y)

1,762
3,500
13,800
5,400
$145,618

Financing
Repayment of loan
Interest at 24% ($2,600
2600*(1/12)*24%
Total effects of financing (z)
Ending cash balance, April 30 (x) (y) (z)

$2,600
52
$2,652
$29,958

purchases budget