Question

Spring Manufacturing Company makes two components identified as C12 and D57. Selected budgetary data for 2019 follow:

	Finished Components
	C12				D57
Requirements for each finished component:
RM 1		10	pounds			8	pounds
RM 2		0				4	pounds
RM 3		2	pounds			1	pound
Direct labor		2	hours			3	hours
Product information:
Sales price	$	200			$	210
Sales (units)		12,000				12,000
Estimated beginning inventory (units)		420				110
Desired ending inventory (units)		300				200

	Direct Materials Information
	RM1				RM2				RM3
Cost per pound	$	6			$	3.50			$	0.50
Estimated beginning inventory in pounds		3,200				1,200				1,300
Desired ending inventory in pounds		3,600				1,300				1,200

The firm expects the average wage rate to be $25 per hour in 2019. Spring Manufacturing uses direct labor hours to apply overhead. Each year the firm determines the overhead application rate for the year based on budgeted direct labor hours for the year. The firm maintains negligible Work-in-Process Inventory and expects the cost per unit for both beginning and ending inventories of finished products to be identical.

	Factory Overhead Information
Indirect materials—variable	$	12,000
Miscellaneous supplies and tools—variable		4,500
Indirect labor—variable		45,000
Supervision—fixed		120,000
Payroll taxes and fringe benefits—variable		210,000
Maintenance costs—fixed		16,000
Maintenance costs—variable		10,090
Depreciation—fixed		71,350
Heat, light, and power—fixed		43,390
Heat, light, and power—variable		15,000
Total	$	547,330

	Selling and Administrative Expense Information
Advertising	$	57,000
Sales salaries		210,000
Travel and entertainment		63,000
Depreciation—warehouse		5,000
Office salaries		59,000
Executive salaries		280,000
Supplies		4,500
Depreciation—office		6,300
Total	$	684,800

The effective income tax rate for the company is 50%.

Required:

1. Prepare the Sales budget for 2019.

2. Prepare the Production budget for 2019.

3. Prepare the Direct materials purchases budget (units and dollars) for 2019.

4. Prepare the Direct labor budget for 2019.

5. Prepare the Factory overhead budget for 2019.

6. Prepare the Cost of goods sold and ending finished goods inventory budgets for 2019.

7. Prepare the Selling and administrative expense budget, broken down into two components: Selling Expenses, and Administrative Expenses for 2019.

8. Prepare the Budgeted income statement, the last item of which is labeled

Answer 1

Answer to first 4 parts of the question:

Answers in TEXT as requested:

1)  

Spring Manufacturing Company
Sales Budget
For the Year 2019
	C12	D57	Total
Sales units	12,000	12,000		units
Selling price per unit	$200	$210
Budgeted sales	$2,400,000	$2,520,000	$4,920,000

2)

Spring Manufacturing Company
Production Budget
For the Year 2019
		C12	D57
Sales units		12,000	12,000
Add: Desired ending inventory of finished goods		300	200
Total units required		12,300	12,200
Less: Beginning inventory of finished goods		-420	-110
Units to be produced		11,880	12,090

3)

Spring Manufacturing Company
Direct Materials Purchase Budget - RM1
For the Year 2019
		For C12	For D57	Total
Units to be produced		11,880	12,090
Pounds required per unit		10	8
Pounds of materials required for production		118,800	96,720	215,520
Add: Desired ending inventory of materials				3,600
Total units required (pounds)				219,120
Less: Beginning inventory of materials on hand				-3,200
Pounds of materials required to be purchased				215,920
Cost per pound				$6.00
Purchase cost of materials required to be purchased				$1,295,520

[Pounds of materials required for production For C12 = 11880 units x 10 pounds = 118800 pounds; For D57 = 12090 units x 8 pounds = 96720 pounds]

4)

Spring Manufacturing Company
Direct Materials Purchase Budget - RM2
For the Year 2019
		For C12	For D57	Total
Units to be produced		11,880	12,090
Pounds required per unit		0	4
Pounds of materials required for production		0	48,360	48,360
Add: Desired ending inventory of materials				1,300
Total units required (pounds)				49,660
Less: Beginning inventory of materials on hand				-1,200
Pounds of materials required to be purchased				48,460
Cost per pound				$3.50
Purchase cost of materials required to be purchased				$169,610

[Pounds of materials required for production For C12 = 11880 units x 0 pounds = 0 pounds; For D57 = 12090 units x 4 pounds = 48360 pounds]

Spring Manufacturing Company
Direct Materials Purchase Budget - RM3
For the Year 2019
		For C12	For D57	Total
Units to be produced		11,880	12,090
Pounds required per unit		2	1
Pounds of materials required for production		23,760	12,090	35,850
Add: Desired ending inventory of materials				1,200
Total units required (pounds)				37,050
Less: Beginning inventory of materials on hand				-1,300
Pounds of materials required to be purchased				35,750
Cost per pound				$0.50
Purchase cost of materials required to be purchased				$17,875

[Pounds of materials required for production For C12 = 11880 units x 2 pounds = 23760 pounds; For D57 = 12090 units x 1 pounds = 12090 pounds]

4)

Spring Manufacturing Company
Direct Labor Budget
For the Year 2019
		For C12	For D57	Total
Units to be produced		11,880	12,090
Direct labor hours required per unit		2	3
Direct labor hours required for production		23,760	36,270
Rate per direct labor hour		$25	$25
Direct labor cost		$594,000	$906,750	$1,500,750

[Direct labor hours required for production For C12 = 11880 units x 2 hours = 23760 hours; For D57 = 12090 units x 3 hours = 36270 hours]

[Direct labor cost For C12 = 23760 hours x $25 = $594000; For D57 = 36270 hours x $25 = $906750; Total = $594000 + $906750 = $1500750]