Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted

direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for
March 2012 is $15 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for
March 2012 is $9,200. Both variable and fixed manufacturing overhead costs are allocated to each unit
of finished goods. Data relating to finished goods inventory for March 2012 are as follows: Knights
Blankets Raiders Blankets Beginning inventory in units 10 15 Beginning inventory in dollars (cost) $1,210
$2,235 Target ending inventory in units 20 25 Budgeted sales for March 2012 are 120 units of the
Knights blankets and 180 units of the Raiders blankets. The budgeted selling prices per unit in March
2012 are $150 for the Knights blankets and $175 for the Raiders blankets. Assume the following in your
answer: ᭿ Work-in-process inventories are negligible and ignored. ᭿ Direct materials inventory and
finished goods inventory are costed using the FIFO method. ᭿ Unit costs of direct materials purchased
and finished goods are constant in March 2012. Required 1. Prepare the following budgets for March
2012: a. Revenues budget b. Production budget in units c. Direct material usage budget and direct
material purchases budget d. Direct manufacturing labor budget e. Manufacturing overhead budget f.
Ending inventories budget (direct materials and finished goods) g. Cost of goods sold budget 2. Suppose
Logo Specialties decides to incorporate continuous improvement into its budgeting process. Describe
two areas where it could incorporate continuous improvement into the budget schedules in
requirement 1. 6-29 Budgeted costs; kaizen improvements. DryPool T-Shirt Factory manufactures plain
white and solid colored T-shirts. Inputs include the following: Price Quantity Cost per unit of output
Fabric $ 6 per yard 1 yard per unit $6 per unit Labor $12 per DMLH 0.25 DMLH per unit $3 per unit
Additionally, the colored T-shirts require 3 ounces of dye per shirt at a cost of $0.20 per ounce. The
shirts sell for $15 each for white and $20 each for colors. The company expects to sell 12,000 white T-
shirts and 60,000 colored T-shirts uniformly over the year. DryPool has the opportunity to switch from
using the dye it currently uses to using an environmentally friendly dye that costs $1.00 per ounce. The
company would still need three ounces of dye per shirt. DryPool is reluctant to change because of the
increase in costs (and decrease in profit) but the Environmental Protection Agency has threatened to
fine them $102,000 if they continue to use the harmful but less expensive dye. Required 1. Given the
preceding information, would DryPool be better off financially by switching to the environ- mentally
friendly dye? (Assume all other costs would remain the same.) 2. Assume DryPool chooses to be
environmentally responsible regardless of cost, and it switchs to the new dye. The production manager
suggests trying Kaizen costing. If DryPool can reduce fabric and labor costs each by 1% per month, how
close will it be at the end of 12 months to the gross profit it would have earned before switching to the
more expensive dye? (Round to the nearest dollar for cal- culating cost reductions) 3. Refer to
requirement 2. How could the reduction in material and labor costs be accomplished? Are there any
problems with this plan? 6-30 Revenue and production budgets. (CPA, adapted) The Scarborough
Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2011, Scarborough’s
budget department gathered the following data to prepare budgets for 2012: 2012 Projected Sales
Product Units Price Thingone 60,000 $165 Thingtwo 40,000 $250