Bombera Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with...

Bombera Ltd operates at capacity and makes glass-topped dining tables and wooden chairs, which are then typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table only, so the sales mix is not exactly 4:1. Bombera Ltd is planning its annual budget for the financial year 2018. Information for 2018 follows:

Input prices

Direct materials

Wood

$5.30 per board metre

Glass

$11.5 per sheet

Direct manufacturing labour

$14 per direct manufacturing labour-hour

Input quantities per unit of output

Chairs

Tables

Direct materials

Wood

1.2 board metres

1.7 board metres

Glass

—

2 sheets

Direct manufacturing labour

3 hours

6 hours

Machine-hours (MH)

2 MH

5 MH

Inventory information, direct materials

Wood

Glass

Beginning inventory

27 200 board metres

8 700 sheets

Target ending inventory

29 360 board metres

9 500 sheets

Sales and inventory information, finished goods

Chairs

Tables

Expected sales in units

172 000

45 000

Selling price

$70

$900

Target ending inventory in units

8 400

2 050

Beginning inventory in units

7 500

2 150

Chairs are manufactured in batches of 500 and tables are manufactured in batches of 50. It takes three hours to set up for a batch of chairs and two hours to set up for a batch of tables. Bombera Ltd uses activity-based costing and has classified all overhead costs as shown in the table below:

Cost type

Budgeted variable

Budgeted fixed

Cost driver/allocation base

Manufacturing:

Materials handling

$342 840

$600 000

Number of board metres used

Set-up

97 000

300 740

Set-up hours

Processing

789 250

5 900 000

Machine-hours

Non-manufacturing:

Marketing

2 011 200

4 500 000

Sales revenue

Distribution

54 000

380 000

Number of deliveries

Delivery trucks transport units sold in delivery sizes of 500 chairs or 500 tables.

Required

For the year 2018:

1. Prepare the revenues budget. (1 mark)

2. Use the revenues budget to:

a. find the budgeted allocation rate for marketing costs (1.5 marks)

b. find the budgeted number of deliveries and allocation rate for distribution costs. (3.5 marks)

3. Prepare the production budget in units. (2 marks)

4. Use the production budget to: