Question

Please provide a:

1) Direct materials budget, including a schedule of expected cash disbursements for materials.

2) Direct labor budget.

Kimmel Gnomes, located in South Dakota, may be the only other manufacturer of high quality clay garden gnomes that are hand finished. Kimmel Gnomes are stoneware, rather than terracotta. Stoneware uses higher-quality clay than terracotta and the gnomes are fired at higher temperature, yielding a stronger, more durable gnome. The gnomes are fired inside and out and are colored with glaze before firing, rather than being painted after firing. As a result Kimmel gnomes retain their color when exposed to the elements and they are not affected by moisture or freezing. The Large Gnome Division manufactures and sells gnomes between 12 and 15 inches in length or height (the "Hedgerow Gnome" model is shown in the picture to the left). Many different styles are made, but each large gnome requires virtually the same amount of time and materials. During 2018-19fiscal year, the average selling price for large gnomes is expected to be $107 per gnome. The Large Gnome Division forecasts the following number gnome sales. Quarter Gnome sales First 44,000 Second 82,000 Third 42,000 Fourth 76,000 The collection pattern for Accounts Receivable is as follows: o o o 75 percent of all sales are collected within the quarter in which they are sold 25 percent of all sales are collected in the following quarter. There are no bad debts/uncollectables. Due to higher than expected demand this year, the Large Gnome Division expects to have no finished gnomes in inventory on July 1, 2018, the beginning of the first quarter of the new fiscal year. To avoid having that problem in the coming fiscal year, the Large Gnome Division would like to have the ending inventory of Gnomes at the end of each of the first three quarters equal to 26% of the budgeted sales for the next quarter. They would like to have 23,000 finished gnomes on hand on June 30, 2019.

Answer 1

Budgeted Production
	First	Second	Third	Fourth
Budgeted sales	44,000	82,000	42,000	76,000
Add: Ending finished goods inventory	21,320	10,920	19,760	23,000
Less: Beginning finished goods inventory	0	21,320	10,920	19,760
Budgeted production	65,320	71,600	50,840	79,240

1.

Direct material budget
	First	Second	Third	Fourth
Budgeted production	65,320	71,600	50,840	79,240
Direct material required per unit (in pounds)	4	4	4	4
Total direct material required for production (in pounds)	261,280	286,400	203,360	316,960
Add: Ending direct material inventory	100,240	71,176	110,936	110,000
Less: Beginning direct material inventory	(70,000)	(100,240)	(71,176)	(110,936)
Total direct material purchases (in pounds)	291,520	257,336	243,120	316,024
Direct material cost per pound	$0.90	$0.90	$0.90	$0.90
Cost of direct material purchases	$262,368	$231,602	$218,808	$284,422

Schedule of expected cash disbursements for materials
	First	Second	Third	Fourth
Accounts payable	$96,000
First	118,066 (262,368*45%)	144,302 (262,368*55%)
Second		104,221 (231,602*45%)	127,381 (231,602*55%)
Third			98,464 (218,808*45%)	120,344 (218,808*55%)
Fourth				127,990 (284,422*45%)
Total	$214,066	$248,523	$225,845	$248,334

2.

Direct Labor Budget
	First	Second	Third	Fourth
Budgeted production	65,320	71,600	50,840	79,240
Direct labor hours required per unit	3	3	3	3
Total direct labor hours required	195,960	214,800	152,520	237,720
Direct labor cost per hour	$15	$15	$15	$15
Total direct labor cost	$2,939,400	$3,222,000	$2,287,800	$3,565,800