Question

Budgeted Income Statement and Supporting Budgets

The budget director of Jupiter Helmets Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for May:

a. Estimated sales for May:

Bicycle helmet	9,500 units at $24 per unit
Motorcycle helmet	6,500 units at $195 per unit

b. Estimated inventories at May 1:

Direct materials:					Finished products:
Plastic		1,480	lbs.		Bicycle helmet		200 units at $15 per unit
Foam lining		520	lbs.		Motorcycle helmet		100 units at $90 per unit

c. Desired inventories at May 31:

Direct materials:					Finished products:
Plastic		2,000	lbs.		Bicycle helmet		400 units at $15 per unit
Foam lining		800	lbs.		Motorcycle helmet		300 units at $100 per unit

d. Direct materials used in production:

In manufacture of bicycle helmet:
Plastic		0.90 lb. per unit of product
Foam lining		0.20 lb. per unit of product
In manufacture of motorcycle helmet:
Plastic		3.50 lbs. per unit of product
Foam lining		1.40 lbs. per unit of product

e. Anticipated cost of purchases and beginning and ending inventory of direct materials:

Plastic		$4.40 per lb.
Foam lining		$0.90 per lb.

f. Direct labor requirements:

Bicycle helmet:
Molding Department		0.30 hr. at $15 per hr.
Assembly Department		0.10 hr. at $14 per hr.
Motorcycle helmet:
Molding Department		0.50 hr. at $15 per hr.
Assembly Department		0.40 hr. at $14 per hr.

g. Estimated factory overhead costs for May:

Indirect factory wages		$125,000			Power and light		$23,000
Depreciation of plant and equipment		45,000			Insurance and property tax		11,000

h. Estimated operating expenses for May:

Sales salaries expense		$175,000
Advertising expense		120,000
Office salaries expense		92,000
Depreciation expense—office equipment		6,000
Miscellaneous expense—selling		5,000
Utilities expense—administrative		3,000
Travel expense—selling		50,000
Office supplies expense		2,500
Miscellaneous administrative expense		1,500

i. Estimated other income and expense for May:

Interest revenue		$14,560
Interest expense		3,000

j. Estimated tax rate: 25%

4. Prepare a direct labor cost budget for May.

Jupiter Helmets Inc.
Direct Labor Cost Budget
For the Month Ending May 31
	Molding Department	Assembly Department	Total
Hours required for production:
Bicycle helmet	__________	____________
Motorcycle helmet	__________	____________
Total	__________	____________
Hourly rate	$_________	$___________
Total direct labor cost	$_________	$___________	$____________

6. Prepare a cost of goods sold budget for May. Work in process at the beginning of May is estimated to be $4,200, and work in process at the end of May is desired to be $3,800.

Jupiter Helmets Inc.
Cost of Goods Sold Budget
For the Month Ending May 31
Finished goods inventory, May 1			$_________
Work in process inventory, May 1		$__________
Direct materials:
Direct materials inventory, May 1	$___________
Direct materials purchases	____________
Cost of direct materials available for use	$___________
Less: Direct materials inventory, May 31	____________
Cost of direct materials placed in production	$___________
Direct labor	____________
Factory overhead	____________
Total manufacturing costs		___________
Total work in process during period		$__________
Less: Work in process inventory, May 31		___________
Cost of goods manufactured			_________
Cost of finished goods available for sale			$________
Less: Finished goods inventory, May 31			_________
Cost of goods sold			$________

8. Prepare a budgeted income statement for May. If required, round your interim calculations to nearest whole value.

Jupiter Helmets Inc.
Budgeted Income Statement
For the Month Ending May 31
Revenue from sales		$__________
Cost of goods sold		___________
Gross profit		$__________
Operating expenses:
Selling expenses	$_________
Administrative expenses	__________
Total operating expenses		____________
Income from operations		$___________
Other income:
Interest revenue	$_________
Other expenses:
Interest expense	__________	____________
Income before income tax		$___________
Income tax expense		____________
Net income		$___________

Answer 1