1)

Regular
Deluxe

Follete Inc.
Revenues Budget
For the Year Ending December 31st , 2011
Units
Selling Price
($)
2,000
80.00
3,000
130.00

Total Revenues
($)
160,000
390,000
550,000

2)
Follete Inc.
Production Budget
For the Year Ending December 31st , 2011
Regular
Budgeted Unit Sales
2,000
Add: Target ending inventory
400
2,400
Less: Beginning finished goods inventory
(250)
Goods to be Manufactured
2,150

Deluxe
3,000
600
3,600
(650)
2,950

3) (a) Budgeted Setup Cost

= Variable setup Costs + Fixed setup Costs
= $6,830 + $11,100
= $17,930

Combs manufactured in batches of 200, therefore divide the number of batches, then
multiply setups by one third (1/3). {20 / 60 = 1/3}

Brushes manufactured in batches of 100, therefore divide the number of batches, then
multiply setups by one (1).

Units to be produced

Combs
12,600

Brushes
14,200

/ 200

/ 100

63

142

*1/3

*1

21

142

Divide per batch

Number of setups
Multiply: Hours per batch

Total Setup Hours

= 142 + 21
= 163 hours
Allocation Rate
= Budgeted Setup Cost / Total Setup Hours
= 17,930 / 163
= $110 per setup
(b)
Combs: 12,600 * 0.25 Machine Hr. = 315 Machine Hrs.
Brushes: 14,200 * 0.1 Machine Hr. = 1,420 Machine Hrs.

Total:

= 1,735 Machine Hrs.

Budgeted Processing
= Variable Processing + Fixed Processing
= $7,760 + $20,000
= $27,760
Allocation Rate
= Budgeted Processing / Total Machine hours
=$27,760 / 1,735 MH
= $16 per machine hour
(c) Budgeted Inspection
= Variable Inspection + Fixed Inspection
= $7,000 + $1,040
= $8,040
Allocation Rate
= Budgeted Inspection / Units to be produced
= $8,040 / 26,800

= $0.30 per unit

4)
Follete Inc.
Direct Materials Usage Budget
For the Year Ending December 31st , 2011
Plastic
Bristles
Physical Units Budget: Units
Combs (12,600 * 5)
63,000 oz.

Brushes (14,200 * 8)
113,600 oz.
{14,200*16}
227,200
Total Direct Materials in units
176,600 oz.
227,200
Cost Budget for direct
materials
Direct materials to be used
176,600
227,200
Less: Beginning inventory

(1,600)

(1,820)

*Input prices

*$0.20

*$0.50

$35,000

$112,690

304

946

$35,304

$113,636

Add: Cost of Beginning

inventory
(FIFO cost flow assumption)
Total direct materials in dollars

Follete Inc.
Direct Materials Purchases Budget
For the Year Ending December 31st , 2011
Plastic
Bristles
Physical units to be used in production
176,600
227,200
Add: Target Ending Direct Material
1,766
2,272
Inventory
178,366
229,472
Less: Beginning Inventory
(1,600)
(1,820)
Purchases in units
176,766
227,652
Cost of Purchases
*Input prices
*$0.20
*$0.50

Total

$148,940

Total

$35,353
Total purchases in dollars

$113,826
$149,179

5) Budgeted Materials Handling Cost

= Variable Materials Handling Cost + Fixed Materials Handling Cost
= $11,490 + $15,000
= $26,490
Allocation Rate
= Budgeted Materials Handling Cost / Number of plastic units to be used in production
= $26,490 / 176,600
= $0.15 per ounce of plastic

6)
Follete Inc.
Direct Manufacturing Labour Cost Budget
For the Year Ending December 31st, 2011
Combs
Brushes
Units to be produced
Direct Labour hours per unit
Total Direct Labour hours
required
Cost per hour ($)
Total Direct Labour cost

12,600
*0.05

14,200
*0.2

630

2840

*12
$7,560

*12
$34,080

Total
($)

$41,640

7)

Materials Handling
Setups

Follete Inc.
Manufacturing Overhead Cost Budget
For the Year Ending December 31st, 2011
Budgeted Variable
Budgeted Fixed
Cost ($)
Cost ($)
11,490
14,200
6,830
11,100

Total
($)
26,490
17,930

Processing

7,760

20,000

27,760

Total

26,080

46,100

72,180

8)

Unit Costs of Ending Finished Goods Inventory (Combs)

For the Year Ending December 31, 2011
Cost per Unit Input Quantities
($)
per Unit of Output
Direct Materials:
Plastic
Bristles
Direct Manufacturing Labour
Manufacturing Overhead
cost:
Materials handling
Machine setups
Processing
Inspection

Total
($)

0.20
0.50
12

5 oz.

.05 hrs.

0.60

0.15
110
16
0.30

5 oz.
0.00167 hrs.
.025 MH
1 unit

0.75
0.18
0.40
0.30
3.23

Machine setups: 21 setups (combs)/12,600 units (Goods to be manufactured) =

0.00167 hrs.

Unit Costs of Ending Finished Goods Inventory (Brushes)

For the Year Ending December 31, 2011
Cost per Unit Input Quantities
($)
per Unit of Output
Direct Materials:
Plastic
0.20
8 oz.
Bristles
0.50
16
Direct Manufacturing Labour
12
0.2 hr.
Manufacturing Overhead
cost:
Materials handling
0.15
8 oz.
Machine setups
110
0.01 hr.
Processing
16
.01 MH

Total
($)
1.60
8.00
2.40
1.20
1.10
1.60

Inspection

0.30

1 unit

0.30
16.20

Machine setups: 142 setups (Brushes)/14,200 units (Goods to be manufactured) =

0.01 hour.

Follete Inc.
Ending Inventories Budget
For the Year Ending December 31, 2011
Quantity
Cost per unit
($)
Direct Materials:
Plastic
Bristles
Finished goods:
Combs
Brushes
Total ending inventory

Total
($)

1,766
2,272

0.20
0.50

353.20
1,136.00

1,489.20

1,200
1,400

3.23*
16.20*

3,876.00
22,680.00

26,556.00
$28,045.20

*Cost per Unit of Combs and Brushes ($3.23, $16.20) include Direct Material, Direct Labour cost and
Manufacturing Overhead cost. Cost values are broken down in the Unit Costs of Ending Finished Goods
Inventory.