BloomBoards Inc. is a small manufacturing firm that produces and sells one model of snowboard (the Pipex). In the fall of 2012 you (the
management accountant) gathered the following data to prepare the 2013 annual budget:
Direct materials Wood = 5 boardfeet (bf) per snowboard
Fiberglass = 6 yards (yds) per snowboard
Direct Labor 5 hours per snowboard
It has been estimated that 1000 units of Pipex will be sold during 2013 at a price of $450 per board. There will be 100 completed boards in inventory at
12/31/12 and it is budgeted that there will be 200 completed boards in inventory at 12/31/13. The direct materials inventories will include:
Inventory at 12/31/12 Inventory at 12/31/13
Wood 2000 bf 1500 bf
Fiberglass 1000 yds 2000 yds
Variable manufacturing overhead is applied at $7.00 per direct labor hour and fixed manufacturing overhead is estimated at $66000 annually (including $26000
of depreciation). Variable marketing costs are $250 per sales visit with 30 visits planned for 2013. Fixed marketing and administrative costs are estimated at
$30000 for 2013 including$12000 of depreciation.
Various budgeted costs for the manufacturing components includes:
2012 Cost 2013 Cost
Wood $28.00 per bf $30.00 per bf
Fiberglass $ 4.80 per yd $ 5.00 per yd
Direct Labor $24.00 per hour $25.00 per hour
The cost of a finished board for 2012 is $374.80. Assume a FIFO flow for all inventories. There is not expected to be any work-in-process inventories at the
end of 2012 or 2013.
All sales wages/salaries and purchases are for cash and the company has a policy to maintain an ending cash balance of $10000. On 12/31/12 BloomBoards
expects to borrow $20000 on a line-of-credit and maintains exactly $10000 as the required balance. The loan carries an interest rate of 11 percent annually.
They will repay as much of the loan as possible (in multiples of $100) along with accrued interest for the year on December 31 2013. Income taxes at a rate
of 30 percent will also be paid at the end of 2013.
Required
1. Prepare the following budgets for BloomBoards for 2013: 1. Sales; 2. Production; 3. Direct Materials (purchases and cost); 4. Direct Labor; 5. Manufacturing
Overhead; 6. Operating Expense; 7. Manufacturing Cost per Unit; 8. Ending Inventories (FG and DM); 9. Cost of Goods Sold; 10. Pro forma Income Statement and
11. Cash Budget.