6.

19

Production Budget:

Finished Goods (units)

Budgeted sales
Add target ending finished goods inventory
Total requirements
Deduct beginning finished goods inventory
Units to be produced

43,000
19,000
62,000
11,000
51,000

Direct Materials Purchases Budget:

Direct Materials
(in gallons)
(51,000 x 3) 153,000
56,000
209,000
66,000
143,000

Direct materials needed for production

Add target ending direct materials inventory
Total requirements
Deduct beginning direct materials inventory
Direct materials to be purchased

6.30
1a.

Revenues Budget
Knights
Blankets

Units sold
Selling price
Budgeted
revenues

130
$229
$29,770

Raiders
Blankets

Total

190
$296
$56,240

$86,0
10

b.
Knights
Blankets
Budgeted unit
sales
Add budgeted ending finish goods
inventory
Total requirements
Deduct beginning finish goods
inventory
Budgeted
production

Raiders
Blankets
130

190

22
152

27
217

12

17

140

200

c. Direct Materials Usage Budget

Red
woo
l
Knights
blankets:
1. Budgeted
input per finish
unit
2.
Budgeted
production
3.
Budgeted
usage (1
2)
Raiders
blankets:
4. Budgeted
input per finish
unit
5.
Budgeted
production
6.
Budgeted
usage (4
5)
7. Total
direct
materials
usage (3 +
6)
Direct Materials
Cost Budget
8.
Beginning
inventory
9. Unit
price
(FIFO)
10. Cost of DM used from
beginning inventory (8 9)
11. Materials to be used
from purchases (7 8)
12. Cost of
DM in

Black
wool

Knights logo
patches

140

140

560

140

Raiders
logo
patches

200

200

1000

200

560

1000

140

200

35

15

45

60

12

315

180

315

360

525
10

985
11

95
7

140
8

Total

1170

March
13. Cost of DM purchased
and used in March (11
12)
14. Direct materials to
be used (10 + 13)

Budgeted usage
Add target ending inventory
Total requirements
Deduct beginning inventory
Total DM purchases
Purchase price
(March)
Total purchases

525
0
556
5

10835

665

1120

11015

980

1480

Red
wool
560
22
582
35
547

Black
wool
1000
22
1022
15
1007

Knights
logos
140
22
162
45
117

Raiders
logos
200
22
222
60
162

10
$5,47
0

11
$11,07
7

$819

$1,296

1787
0
1904
0

Total

$18,6
62

6.31
1.

Increase in Costs for the Year Assume Dry Pool uses New Dye
Units to dye
60000
Cost differential ($1-$.40) per ounce x 3
ounces
1.8
Increase in costs
$108,000
Since the fine is $120,000, they would be financially better off by switching.
2. If DryPool switches to the new dye, costs will increase by $144,000.
If DryPool implements kaizen costing, costs will be reduced as follows:
Original monthly costs

Input

Unit
cost

Number of
units

Fabric

$7

6000

Labor

$4

6000

Total

Total
cost
$42,0
00
$21,0
00
$63,0
00

Annual cost
$504,000
$252,000
$756,000

Number of units = (12,000 + 60,000)/12 months = 6,000 units

Monthly decrease
Month 1
Month 2
Month 3
Month 4
Month 5
Month 6
Month 7
Month 8
Month 9
Month 10
Month 11
Month 12

Total

$42,00
0
$41,58
0
$41,16
4
$40,75
3
$40,34
5
$39,94
2
$39,54
2
$39,14
7
$38,75
5
$38,36
8
$37,98
4
$37,60
4
$477,1
84

Month
1
Month
2
Month
3
Month
4
Month
5
Month
6
Month
7
Month
8
Month
9
Month
10
Month
11
Month
12

21000
$20,790
$20,582
$20,376
$20,173
$19,971
$19,771
$19,573
$19,378
$19,184
$18,992
$18,802
$238,592

$715,7
75

The different with and without Kaizen improvement = $756,000 - $715,775 = $40,225