Redford Corporation Manufacturing Budget Redford Corporation, a maker of high-st

Question

Redford Corporation

Manufacturing Budget

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:

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

Redford Corporation

Manufacturing Budget

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:

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

Production units Materials - metal rodsfclasps Materials - high-strength fabric Materials - Resin handles Direct Labor-Cuand Assembly Line$ 28.00 Per hour Packing&Inspection; Costs(variable 300.00 Per beatch Factory fixed costs 400,0CO $120 Per sa yord $ 0.25 peruni 300,000 Py Yeor $ 300,CCO Per Year

Explanation / Answer

Q1. Manufacturing Cost Budget for 2019 by quarter, assuming flat activity and equal-length quarters (do not adjust for days)- Solution Particular Q1 Q2 Q3 Q4 Total Production unit    100,000.00    100,000.00    100,000.00    100,000.00                 400,000.00 Material Metal Rod Matel Rod Requirment per Quater=> 100000*100/95= 105263.16 (App) i.e 105264 42105.6 42105.6 42105.6 42105.6 168422.4 Since material rods are in parts so we have considered .16 as 1 part        (105264*0.4=42105.60) Material High strength fabric (per umbrella requires 1.5 yard fabric)    200,000.00    200,000.00    200,000.00    200,000.00       800,000.00 Hence Requirment for 100000 units = 100000*1.5= 150000 sq yard       (166666.67*1.2=200000) Requirment of Fabric before loss in cutting =150000*100/90=166666.67             Amount reliased form sale of Scrap      (4,000.00)      (4,000.00)      (4,000.00)      (4,000.00) -16000 (166666.67-150000)*0.24=4000 (Since Revenue hence shown in Negative) Material Resin Handle    (100000*0.25=25000) 25000 25000 25000 25000 100000 Direct Labour Cutting and Assembly (500*20*28=280000) 280000 280000 280000 280000 1120000 No batch per quater =100000/200=500 0 0 Packing and inspection (300*500=150000) 150000 150000 150000 150000 600000 0 Fixed Cost per quarter 300000/4=75000 75000 75000 75000 75000 300000 0 Total Cost of Production 768105.6 768105.6 768105.6 768105.6 3072422.42 Q2. 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 1st Half of year 2nd Half of year Particular Q1 Q2 Q3 Q4 Total Production unit (50% increse in 2nd quarter ie 100000*150%=150000) 100000 100000 150000 150000 500000 Material Metal Rod Matel Rod Requirment per Quater => 100000*100/95= 105263.16 (App) i.e 105264 |(105264*0.4=42105.60)| 42105.6 42105.6 63158 63158 210527.2 Material Metal Rod in 2nd Half of year per quarter =150000*100/95= 157895 (App) | (157895*0.4=63158.00)| Since material rods are in parts so we have considered .16 as 1 part Material High strength fabric (per umbrella requires 1.5 yard fabric)    200,000.00    200,000.00    300,000.00    300,000.00 1,000,000.01 Hence Requirment for 100000 units = 100000*1.5= 150000 sq yard Requirment of Fabric before loss in cutting (1st Half yr) =150000*100/90=166666.67         |(166666.67*1.2=200000) Requirment of Fabric before loss in cutting in 2nd half =225000*100/90=250000      | (250000*1.2=300000) Amount reliased form sale of Scrape      (4,000.00)      (4,000.00)      (6,000.00)      (6,000.00)       (20,000.00) for 1st half yr(166666.67-150000)*0.24=4000 / for 2nd half yr= (250000-225000)*0.24 =6000 Since Resale of Scape is Revenue shown in negative Material Resin Handle 25000 25000 37500 37500 125000 Direct Labour Cutting and Assembly (500*20*28) 280000 280000 420000 420000 1400000 No batch per quater =100000/200=500                               |(500*20*28=280000)| 0 No batch per quarter in 2nd half =150000/200=750        |(750*20*28=420000)| 0 Packing and inspection (300*500=150000) 2nd Qt Packing and inspection (300*750=225000) 150000 150000 225000 225000 750000 0 Fixed Cost per quarter 360000/4 90000 90000 90000 90000 360000 0 Total Cost of Production 783105.6 783105.6 1129658 1129658 3825527.21

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