Budget

Required:

a.       Archie Ltd plans to make and sell 20 000Gizmos in the first quarter of next year. The selling price for the product is $120.Prepare the revenue budget for the first quarter.

b.      Prepare the direct material usage budget for the first quarter of next year.

c.       Prepare the direct manufacturing labour usage budget for the first quarter of next year.

d.      Prepare the manufacturing overhead cost budget for each activity for the first quarter of next year.

e.       Compute the budgeted unit cost of a gizmo for the first quarter of next year.

f.       Prepare the cost of goods sold budget for the first quarter of next year. Assume Archie Ltd budgets 1000 units of beginning finished goods inventory at a cost of $72 per unit. The company uses the FIFO cost flow assumption for finished goods inventory. It expects to sell all 20 000 Gizmos made in the first quarter.

g.      Calculate the budgeted gross margin for the first quarter of next year.

h.      The company’s managers want to implement Kaizen Costing. They budget a 1% decrease in materials quantity and direct manufacturing labour-hours and a 3% decrease in set-up time per unit for each subsequent quarter. Calculate the budgeted unit cost and gross margin for quarters two and three. Assume no change in the budgeted output.

i.        Refer to the above requirement. How could the reduction in materials and time be accomplished? Are there any problems with this plan?