The Sharpe Batting Company manufactures wood baseball bats. Sharpe's two primary products are a youth bat, designed for children and young teens and an adult bat, designed for high school and college-aged players. Sharpe sells the bats to sporting goods stores and all sales are on account. The youth bat sells for $55; the adult bat sells for $75. Sharpe's highest sales volume is in the first three months of the year as retailers prepare for the sprin baseball season. Sharpe's balance sheet for December 31, 2024, and other data for the first quarter of 2025 follow. (Click the icon to view the balance sheet.) (Click the icon to view the other data.) Read the requirements. Requirement 1. Prepare Sharpe's sales budget for the first quarter of 2025. Sharpe Batting Company Sales Budget 2035
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
a. Budgeted sales are 2,000 youth bats and 2,
2,900 adult bats.
b. Finished Goods Inventory on December 31, 2024, consists of 200 youth bats at $15
each and 650 adult bats at $20 each.
c. Desired ending Finished Goods Inventory is 220 youth bats and 400 adult bats;
FIFO inventory costing method is used.
d. Direct materials requirements are 42 ounces of wood per youth bat and 64 ounces of wood per adult bat. The cost of wood is $0.40 per ounce.
e. Raw Materials Inventory on December 31, 2024, consists of 22,000 ounces of wood at 50.40 per ounce.
f. Desired ending Raw Materials Inventory is 22,000 ounces (indirect materials are insignificant and not considered for budgeting purposes).
g. Each bat requires 0.6 hours of direct labor; direct labor costs average $12 per hour.
h. Variable manufacturing
i. Fixed manufacturing overhead includes $500 per quarter in depreciation and $3,703 per quarter for other costs, such as insurance and property taxes.
Fixed selling and administrative expenses include $6,000 per quarter for salaries: $3,000 per quarter for rent; $1,200 per quarter for insurance, and $400 per quarter for depreciation.
k. Variable selling and administrative expenses include supplies at 3% of sales.
Prepare Sharpe's sales budget for the first quarter of 2025.
2. Prepare Sharpe's production budget for the first quarter of 2025.
3. Prepare Sharpe's direct materials budget, direct labor budget, and manufacturing overhead budget for the first quarter of 2025. Round the predetermined overhead allocation rate to two decimal places. The overhead allocation base is direct labor hours.
4. Prepare Sharpe's cost of goods sold budget for the first quarter of 2025.
5. Prepare Sharpe's selling and administrative expense budget for the first quarter of 2025.
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