Question

Pargo Company is preparing its budgeted income statement for 2017. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.

Sales. Sales for the year are expected to total  1,100,000 units. Quarterly sales are  22%,  24%,  25%, and  29%, respectively. The sales price is expected to be $ 41 per unit for the first three quarters and $ 47 per unit beginning in the fourth quarter. Sales in the first quarter of 2018 are expected to be  15% higher than the budgeted sales for the first quarter of 2017.

Production. Management desires to maintain the ending finished goods inventories at  20% of the next quarter’s budgeted sales volume.

Direct materials. Each unit requires  2 pounds of raw materials at a cost of $ 9 per pound. Management desires to maintain raw materials inventories at  10% of the next quarter’s production requirements. Assume the production requirements for first quarter of 2018 are  510,000 pounds.

Pargo budgets  0.3 hours of direct labor per unit, labor costs at $ 11 per hour, and manufacturing overhead at $ 17 per direct labor hour. Its budgeted selling and administrative expenses for 2017 are $ 6,558,000.

Calculate the budgeted total unit cost. (Round answer to 2 decimal places, e.g. 12.25.)

Total unit cost

$

Prepare the budgeted multiple-step income statement for 2017. (Ignore income taxes.)

PARGO COMPANY Budgeted Income Statement   For the Year Ending December 31, 2017December 31, 2017For the Quarter Ending December 31, 2017
Beginning InventoryCost of Goods SoldEnding InventoryGross ProfitIncome Before Income TaxesIncome from OperationsIncome Tax ExpenseNet Income / (Loss)Operating ExpensesPurchasesSalesSelling and Administrative ExpensesTotal Operating Expenses		$
Beginning InventoryCost of Goods SoldEnding InventoryGross ProfitIncome Before Income TaxesIncome from OperationsIncome Tax ExpenseNet Income / (Loss)Operating ExpensesPurchasesSalesSelling and Administrative ExpensesTotal Operating Expenses
Beginning InventoryCost of Goods SoldEnding InventoryGross ProfitIncome Before Income TaxesIncome from OperationsIncome Tax ExpenseNet Income / (Loss)Operating ExpensesPurchasesSalesSelling and Administrative ExpensesTotal Operating Expenses
Beginning InventoryCost of Goods SoldEnding InventoryGross ProfitIncome Before Income TaxesIncome from OperationsIncome Tax ExpenseNet Income / (Loss)Operating ExpensesPurchasesSalesSelling and Administrative ExpensesTotal Operating Expenses
Beginning InventoryCost of Goods SoldEnding InventoryGross ProfitIncome Before Income TaxesIncome from OperationsIncome Tax ExpenseNet Income / (Loss)Operating ExpensesPurchasesSalesSelling and Administrative ExpensesTotal Operating Expenses		$

Answer 1

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1. Sales Budget
		Q1	Q2	Q3	Q4	Full Year	2018 Q1
Budgeted Sales Units		242000	264000	275000	319000	1100000	278300
Selling Price		$             41	$                               41	$               41	$               47		$               47
Budgeted Sales Units		$9,922,000	$                10,824,000	$11,275,000	$14,993,000	$47,014,000	$13,080,100
2. Production Budget
		Q1	Q2	Q3	Q4	Full Year	2018 Q1
Budgeted Sales Units		242000	264000	275000	319000	1100000	278300
Add: Desired ending Inventory	20% of Next	52800	55000	63800	55660	55660
Total needs		294800	319000	338800	374660	1155660
Less: Beginning Inventory		-48400	-52800	-55000	-63800	-48400
Budgeted Production		246400	266200	283800	310860	1107260
Budgeted Total Unit Cost:
	Input Unit	Rate	Cost per Unit of output
Direct Material	2	$          9.00	$                         18.00
Direct Labor	0.3	$        11.00	$                            3.30
Overheads	0.3	$        17.00	$                            5.10
Total unit Cost			$                         26.40
Budgeted Income Statement:
Sales Revenue			$                47,014,000
Less: Cost of Goods Sold	1100000*26.4		$                29,040,000
Gross Margin			$                17,974,000
Less: Selling and Admin Expense			$                  6,558,000
Net Income			$                11,416,000