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ACCM4100 Management Accounting

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Question:

Sweden Ltd manufactures cabinets. Your team works in the accounting department and has been tasked with preparing the Budget for the next month Your team has also been asked to provide management with some information and advice on kaizen budgeting.
Sweden makes two products:
Premium cabinets - large cabinets with mirrors
De Luxe cabinets - medium sized cabinets with an innovative shelving solution Direct manufacturing labour is 3 hours for the premium cabinet and 5 hours for the De Luxe. The budgeted direct material usage for each product in 2018 is:
Square metres Premium De Luxe
Mirrors 2 0
Softwood 1 5
Hardwood 4 1
Balsa wood 1 4

Opening direct materials inventory for September 2018 is:Square metres Premium De Luxe
Mirrors 40 0
Softwood 10 30
Hardwood 100 5
Balsa wood 4 40

Target ending direct materials inventory (September 30) is:Square metres Premium De Luxe
Mirrors 24 0
Softwood 6 40
Hardwood 80 4
Balsa wood 4 44

Unit cost data is expected to be the same for September as it was in August for labour and all materials except Balsa Wood where a change in supplier has resulted in a cost increase of 50%. Detailed cost data is as follows:
August (actual) September (budgeted)

Mirrors per square metre 160 160
Softwood per square metre 125 125
Hardwood per square metre 12 12
Balsa wood per square metre 16 24
Manufacturing labour cost per hour 30 30

Manufacturing overhead (both variable and fixed) is allocated to each cabinet on the basis of budgeted direct manufacturing labour hours.The budgeted variable manufacturing overhead rate for September 2018 is $35 per direct manufacturing labour-hour.
The budgeted fixed manufacturing overhead for the month is $42,500. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods on the basis of direct manufacturing labour-hours.
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