Question

Budgeted Income Statement and Supporting Budgets

The budget director of Birds of a Feather 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 January:

1. Estimated sales for January:

   Birdhouse	6,000 units at $55 per unit
   Bird feeder	4,500 units at $75 per unit

2. Estimated inventories at January 1:

   Direct materials:
   Wood	220 ft.
   Plastic	250 lb.
   Finished products:
   Birdhouse	300 units at $23 per unit
   Bird feeder	240 units at $34 per unit

3. Desired inventories at January 31:

   Direct materials:
   Wood	180 ft.
   Plastic	210 lb.
   Finished products:
   Birdhouse	340 units at $23 per unit
   Bird feeder	200 units at $34 per unit

4. Direct materials used in production:

   In manufacture of BirdHouse:
   Wood	0.80 ft. per unit of product
   Plastic	0.50 lb. per unit of product
   In manufacture of Bird Feeder:
   Wood	1.20 ft. per unit of product
   Plastic	0.75 lb. per unit of product

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

   Wood	$8.00 per ft.
   Plastic	$1.20 per lb.

6. Direct labor requirements:

   Birdhouse:
   Fabrication Department	0.20 hr. at $15 per hr.
   Assembly Department	0.30 hr. at $12 per hr.
   Bird Feeder:
   Fabrication Department	0.40 hr. at $15 per hr.
   Assembly Department	0.35 hr. at $12 per hr.

7. Estimated factory overhead costs for January:

   Indirect factory wages	$80,000
   Depreciation of plant and equipment	25,000
   Power and light	8,000
   Insurance and property tax	2,000

8. Estimated operating expenses for January:

   Sales salaries expense	$90,000
   Advertising expense	20,000
   Office salaries expense	18,000
   Depreciation expense—office equipment	800
   Telephone expense—selling	500
   Telephone expense—administrative	200
   Travel expense—selling	5,000
   Office supplies expense	250
   Miscellaneous administrative expense	450

9. Estimated other income and expense for January:

   Interest revenue	$300
   Interest expense	224

10. Estimated tax rate: 30%

Required:

1. Prepare a sales budget for January.

Birds of a Feather Inc. Sales Budget For the Month Ending January 31
	Unit Sales Volume	Unit Selling Price	Total Sales
Birdhouse
Bird feeder
Total revenue from sales			$

2. Prepare a production budget for January.

Birds of a Feather Inc. Production Budget For the Month Ending January 31
	Units
		Birdhouse		Bird Feeder
Expected units to be sold
Plus desired inventory, January 31
Total
Less estimated inventory, January 1
Total units to be produced

3. Prepare a direct materials purchases budget for January.

Birds of a Feather Inc. Direct Materials Purchases Budget For the Month Ending January 31
	Wood	Plastic	Total
Required units for production:
Birdhouse
Bird feeder
Plus desired units of inventory, January 31
Total
Less estimated units of inventory, January 1
Total units to be purchased
Unit price	$	$
Total direct materials to be purchased	$	$	$

4. Prepare a direct labor cost budget for January.

Birds of a Feather Inc. Direct Labor Cost Budget For the Month Ending January 31
			Fabrication Department		Assembly Department	Total
Hours required for production:
	Birdhouse
	Bird feeder
	Total
Hourly rate			$		$
Total direct labor cost			$		$	$

5. Prepare a factory overhead cost budget for January.

Birds of a Feather Inc. Factory Overhead Cost Budget For the Month Ending January 31
	Indirect factory wages
	Depreciation of plant and equipment
	Power and light
	Insurance and property tax
	Total	$

6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $29,000, and work in process at the end of January is estimated to be $35,400.

Birds of a Feather Inc. Cost of Goods Sold Budget For the Month Ending January 31
Direct materials:
Cost of direct materials available for use
Cost of direct materials placed in production
Total manufacturing costs
Total work in process during the period
Cost of goods manufactured
Cost of finished goods available for sale
Cost of goods sold			$

7. Prepare a selling and administrative expenses budget for January.

Birds of a Feather Inc. Selling and Administrative Expenses Budget For the Month Ending January 31
Selling expenses:
	Sales salaries expense
	Advertising expense
	Telephone expense—selling
	Travel expense—selling
	Total selling expenses
Administrative expenses:
	Office salaries expense
	Depreciation expense—office equipment
	Telephone expense—administrative
	Office supplies expense
	Miscellaneous administrative expense
	Total administrative expenses
Total operating expenses			$

8. Prepare a budgeted income statement for January.

Birds of a Feather Inc. Budgeted Income Statement For the Month Ending January 31
Selling and administrative expenses:
	Total selling and administrative expenses
Other revenue:
Other expenses:
			$

Answer 1

1. Estimated sales budget

	Volume	Selling Price	Total Sales
Bird House	6000	$55	$330000
Bird Feeder	4500	$75	$337500
Total Revenue from Sales			$667500

2. Production Budget

	Bird House	Bird Feeder
Expected Sales(units)	6000	4500
+ Desired Inventory Jan. 31	340	200
Total	6340	4700
(-) Desired inventory Jan.1	300	240
Units to be produced	6040	4460

3. Direct Material Purchase Budget

	Wood	Plastic	Total
Required units for production
Bird House	4832 ft (6040*0.8)	3020 lb (6040*0.5)
Bird Feeder	5352 ft (4460*1.2)	3345 lb (4460*.75)
+ Desired units of inventory Jan.31	180	210
Total	10364	6575
(-) Desired units of inventory Jan.1	220	250
Total units to be purchased	10144 ft	6325 lb
Unit Price	8 $/ft	1.20$/lb
Direct material to be purchased	81152$	7590$	$88742

4. Labour Cost Budget

	Fabrication Department	Assembely Department	Total
Hours required for production
Bird House	1208 hrs (6040*0.20)	1812 hrs (6040*0.30)
Bird Feeder	1784 hrs (4460*0.40)	1561 hrs (4460*0.35)
Total	2992 hrs	3373 hrs
Hourly Rate	$15/ hrs	$12/hr
Total Direct Labour Cost	44880$	$40476	$85356