Reference no: EM13317030

PART 1

Carlton Ltd operates at capacity and makes glass-topped dining tables and wooden chairs which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs and others buy some chairs or a table only, so the sales mix is not exactly 4:1. The company is planning its annual budget for the financial year 2015. The following information has been compiled for the budgetary process:

Input prices
Direct materials
Wood	$6.40 per board metre
Glass	$12 per sheet
Direct manufacturing labour	$15 per direct manufacturing labour-hour

Input quantities per unit of output	Chairs	Tables
Direct materials
Wood	1.25 board metres	1.75 board metres
Glass	-	2 sheets
Direct manufacturing labour	4 hours	8 hours
Machine-hours (MH)	3 MH	5MH

Inventory information, direct materials	Wood	Glass
Beginning inventory	27,300 board metres	8,750 sheets
Target ending inventory	29,375 board metres	9,000 sheets
Cost of beginning inventory	$170,352	$109,375

Sales and inventory information, finished goods	Chairs	Tables
Expected sales in units	172,000	45,000
Selling price	$80	$900
Target ending inventory in units	8,500	2,250
Beginning inventory in units	8,000	2,100
Beginning inventory in dollars	$760,000	$477,000

• Carlton Ltd accounts for direct materials using a FIFO cost flow. It also uses a FIFO cost flow assumption for finished goods inventory.
• Chairs are manufactured in batches of 500, and tables are manufactured in batches of 50.
• It takes three hours to set up for a batch of chairs, and two hours to set up for a batch of tables.

The company uses activity-based costing and has classified all overhead costs as shown in the table below:

Cost type	Budgeted variable	Budgeted fixed	Cost driver/allocation base
Manufacturing:
Materials handling	$342,840	$600,000	Number of board metres used
Set-up	97,000	300,740	Set-up hours
Processing	789,250	5,900,000	Machine hours
Non-manufacturing:
Marketing	2,011,200	4,500,000	Sales revenue
Distribution	54,000	380,000	Number of deliveries

Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables.

Required:

For the year 2015:

a. Prepare the sales budget.

b. Prepare the production budget in units.

c. Prepare the direct material usage budget and the direct material purchases budget.

d. Prepare the direct manufacturing labour cost budget.

e. Prepare the manufacturing overhead cost budget.

f. Prepare the budgeted unit cost of ending finished goods inventory and ending inventories budget.

g. Prepare the non-manufacturing overhead costs budget.

h. Prepare a budgeted income statement (ignore income taxes).

i. Compare the budgeted unit cost of a chair to its budgeted selling price. Why might the company continue to sell the chairs for only $80?

PART 2

Please access the 6-papers on budgeting posted on your site. 

Required:

Write a critical review essay based on the above papers.