Reference no: EM133114225
Question - Diane Buswell is preparing the 2020 budget for one of Current Designs' rotomolded kayaks. Extensive meetings with members of the sales department and executive team have resulted in the following unit sales projections for 2020.
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Quarter 1
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1,900
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Kayaks
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Quarter 2
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2,200
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kayaks
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Quarter 3
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1,750
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kayaks
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Quarter 4
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1,750
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kayaks
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Current Designs' policy is to have finished goods ending inventory in a quarter equal to 30% of the next quarter's anticipated sales. Preliminary sales projections for 2021 are 1,100 units for the first quarter and 2,200 units for the second quarter. Ending inventory of finished goods at December 31, 2019, will be 570 rotomolded kayaks.
Production of each kayak requires 60 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). Company policy is that the ending inventory of polyethylene powder should be 20% of the amount needed for production in the next quarter. Assume that the ending inventory of polyethylene powder on December 31, 2019, is 19,000 pounds. The finishing kits can be assembled as they are needed. As a result, Current Designs does not maintain a significant inventory of the finishing kits.
The polyethylene powder used in these kayaks costs $1.30 per pound, and the finishing kits cost $180 each. Production of a single kayak requires 2 hours of time by more experienced, type I employees and 3 hours of finishing time by type II employees. The type I employees are paid $16 per hour, and the type II employees are paid $13 per hour.
Selling and administrative expenses for this line are expected to be $42 per unit sold plus $6,800 per quarter. Manufacturing overhead is assigned at 140% of labor costs.
Required - Prepare the production budget for this product line by quarter and in total for 2020.
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