1)

Follete Inc.Revenues Budget

For the Year Ending December 31st , 2011Units Selling Price

($)Total Revenues($)

Regular 2,000 80.00 160,000Deluxe 3,000 130.00 390,000

550,000

2)

Follete Inc.Production Budget

For the Year Ending December 31st , 2011Regular Deluxe

Budgeted Unit Sales 2,000 3,000Add: Target ending inventory 400 600

2,400 3,600

Less: Beginning finished goods inventory (250) (650)

Goods to be Manufactured 2,150 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).

Combs Brushes

Units to be produced

Divide per batch

Number of setups

Multiply: Hours per batch

12,600

/ 200

63

*1/3

21

14,200

/ 100

142

*1

142

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 , 2011Plastic Bristles Total

Physical Units Budget: Units Combs (12,600 * 5) 63,000 oz. ─ Brushes (14,200 * 8) 113,600 oz. {14,200*16}

227,200Total Direct Materials in units 176,600 oz. 227,200

Cost Budget for direct materialsDirect 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

Add: Cost of Beginning inventory(FIFO cost flow assumption)

304 946

$35,304 $113,636

Total direct materials in dollars $148,940

Follete Inc.Direct Materials Purchases Budget

For the Year Ending December 31st , 2011Plastic Bristles Total

Physical units to be used in production 176,600 227,200Add: Target Ending Direct Material Inventory

1,766 2,272

178,366 229,472Less: Beginning Inventory (1,600) (1,820)Purchases in units 176,766 227,652Cost of Purchases*Input prices *$0.20 *$0.50

$35,353 $113,826

Total purchases in dollars $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 BudgetFor the Year Ending December 31st, 2011

Combs Brushes Total($)

Units to be produced 12,600 14,200Direct Labour hours per unit *0.05 *0.2

Total Direct Labour hours required

630 2840

Cost per hour ($) *12 *12Total Direct Labour cost $7,560 $34,080 $41,640

7)

Follete Inc.Manufacturing Overhead Cost Budget

For the Year Ending December 31st, 2011Budgeted Variable Budgeted Fixed Total

Cost ($) Cost ($) ($)Materials Handling 11,490 14,200 26,490Setups 6,830 11,100 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

Total($)

Direct Materials: Plastic 0.20 5 oz. 1 Bristles 0.50 ─ ─Direct Manufacturing Labour 12 .05 hrs. 0.60Manufacturing Overhead cost: Materials handling 0.15 5 oz. 0.75 Machine setups 110 0.00167 hrs. 0.18 Processing 16 .025 MH 0.40 Inspection 0.30 1 unit 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

Total($)

Direct Materials: Plastic 0.20 8 oz. 1.60 Bristles 0.50 16 8.00Direct Manufacturing Labour 12 0.2 hr. 2.40Manufacturing Overhead cost: Materials handling 0.15 8 oz. 1.20

Machine setups 110 0.01 hr. 1.10 Processing 16 .01 MH 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

($)

Total

($)

Direct Materials:

Plastic 1,766 0.20 353.20

Bristles 2,272 0.50 1,136.00 1,489.20

Finished goods:

Combs 1,200 3.23* 3,876.00

Brushes 1,400 16.20* 22,680.00 26,556.00

Total ending inventory $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.