Prepare the Direct material usage budget and direct material purchases budget

Renato Company manufactures blankets. The company sews the blankets from fabric and sews on a logo patch purchased from another company. Products are as follows:

Blanket A (made of orange wool) and Blanket B (made of purple wool).

Blanket B is slightly larger than the Blanket A.

The budgeted direct-cost inputs for each product in 2020 are as follows:

Blanket A Blanket B
Orange wool fabric 4 yards 0 yards
Purple wool fabric 0 5
Blanket A logo patches 1 0
Blanket B logo patches 0 1
Direct manufacturing labor 3 hours 4 hours

Unit data pertaining to the direct materials for January 2020 are as follows:

Actual Beginning Direct Materials Inventory (1.1.2020)

Blanket A Blanket B
Orange wool fabric 35 yards 0 yards
Purple wool fabric 0 15
Blanket A logo patches 45 0
Blanket B logo patches 0 60

Target Ending Direct Materials Inventory (31.1.2020)

Blanket A Blanket B
Orange wool fabric 25 yards 0 yards
Purple wool fabric 0 15
Blanket A logo patches 25 0
Blanket B logo patches 0 25

Unit cost data for direct-cost inputs pertaining to December 2019 and January 2020 are as follows:

December 2019 (actual) January 2020 (budgeted)
Orange wool fabric (per yard) $ 9 $ 10
Purple wool fabric (per yard) 12 11
Blanket A logo patches (per patch) 7 7
Blanket B logo patches (per patch) 6 8
Manufacturing labor cost per hour 26 27

Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of budgeted direct manufacturing labor-hours per blanket. The budgeted variable manufacturing overhead rate for January 2020 is $16 per direct manufacturing labor-hour. The budgeted fixed manufacturing overhead for January 2020 is $14,640. Both variable and fixed manufacturing overhead costs are allocated to each unit of finished goods.

Budgeted sales for January 2020 are 130 units of Blanket A and 190 units of Blanket B. The budgeted selling prices per unit in January 2020 are $229 for the Blanket A and $296 for Blanket B. Assume the following in your answer:

§ Work-in-process inventories are negligible and ignored.

§ Direct materials inventory is costed using the FIFO method.

§ Unit costs of direct materials purchased is constant in January 2020

Required:

Prepare the following budgets for January 2020:

a.Revenues budget

b.Production budget in units

c.Direct material usage budget and direct material purchases budget

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