Redford Corporation Manufacturing Budget ***please show calculations Redford Cor

Question

Redford Corporation
Manufacturing Budget

***please show calculations

Redford Corporation, a maker of high-strength umbrellas, is preparing a preliminary manufacturing budget for the year 2019
They have gathered the following estimate data from various teams:
Production units 400,000
Materials - metal rods/clasps $           0.40 per unit, before wastage
Materials - high-strength fabric $           1.20 Per sq. yard
Materials - Resin handles $           0.25 per unit
Direct Labor - Cutting and Assembly Line $         28.00 Per hour
Packing & Inspection Costs (variable) $       300.00 Per batch
Factory fixed costs $    300,000 Per Year
Additional information given:
Roughly 5% of metal parts are damaged or defective and are discarded as wastage
Each umbrella uses 1.5 sq. yards of high-strength fabric
Roughly 10% of the initial fabric quantity is not usable in the umbrellas due to the cutting process, but 20% of the value of this fabric is recovered by selling the unused pieces to a dealer
The current process uses roughly 20 hours of direct labor (cutting and assembly line) per batch of umbrellas
Each batch has 200 umbrellas
Q1. Prepare a Manufacturing Cost Budget for 2019 by quarter, assuming flat activity and equal-length quarters (do not adjust for days)
Q2. Prepare a High Case budget alternative assuming that production ramps up 50% in the second half.
       In this scenario, assume fixed costs increase by $60,000/yr due to need for additional storage space, while variable cost structure is unchanged

Explanation / Answer

Requirement Q1 Redford Corporation Manufacturing cost budget for 2019 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total production units 100000 100000 100000 100000 400000 Materials-metal rods/clasps 40000 40000 40000 40000 160000 Materials-High strengh Fabric 176400 176400 176400 176400 705600 Materials Resin handles 25000 25000 25000 25000 100000 Direct cutting and assembly 280000 280000 280000 280000 1120000 Packing and inspection costs 150000 150000 150000 150000 600000 Fixed Factory cost 75000 75000 75000 75000 300000 Total manufacturing cost 746400 746400 746400 746400 2985600 Working Notes Calculation of Materials -metals & clasps =100000*0.4 40000 For each quarter Materials-High strength fabric =100000*1.2*1.5 180000 Less : Value of fabric recoved =180000*10%*20% 3600 Net Materials cost of fabric 176400 For each quarter Materials Resin handles =100000*0.25 25000 For each quarter Direct cutting and assembly =20/200*28*100000 280000 For each quarter Packing and inspection costs =100000/200*300 150000 For each quarter Fixed Factory cost =300000/4 75000 For each quarter Requirement Q2 Redford Corporation Manufacturing cost budget for 2019 Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total production units 100000 100000 150000 150000 500000 Materials-metal rods/clasps 40000 40000 60000 60000 200000 Materials-High strengh Fabric 176400 176400 264600 264600 882000 Materials Resin handles 25000 25000 37500 37500 125000 Direct cutting and assembly 280000 280000 420000 420000 1400000 Packing and inspection costs 150000 150000 225000 225000 750000 Fixed Factory cost 75000 75000 105000 105000 360000 Total manufacturing cost 746400 746400 1112100 1112100 3717000 Working Notes for second half Calculation of Materials -metals & clasps =150000*0.4 60000 For each quarter of second half Materials-High strength fabric =150000*1.2*1.5 270000 Less : Value of fabric recoved =270000*10%*20% 5400 Net Materials cost of fabric 264600 For each quarter of second half Materials Resin handles =150000*0.25 37500 For each quarter of second half Direct cutting and assembly =20/200*28*150000 420000 For each quarter of second half Packing and inspection costs =150000/200*300 225000 For each quarter of second half Fixed Factory cost =300000/4+30000 105000 For each quarter of second half Note: Increased in fixed factory cost by $60000 can be allocated to all quarters equally. However, we have assumed that additional storage space is hired in second half and thus allocated this cost to quarters of second half only.

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