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	8,000 units at $24 per unit
Motorcycle helmet	7,250 units at $190 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%

Required:

1. Prepare a sales budget for May.

Jupiter Helmets Inc.
Sales Budget
For the Month Ending May 31
	Unit Sales Volume	Unit Selling Price	Total Sales
Bicycle helmet		$	$
Motorcycle helmet
Total revenue from sales			$

2. Prepare a production budget for May.

Jupiter Helmets Inc.
Production Budget
For the Month Ending May 31
	Bicycle Helmet Units	Motorcycle Helmet Units
Expected units to be sold
Plus desired inventory, May 31
Total
Less estimated inventory, May 1
Total units to be produced

3. Prepare a direct materials purchases budget for May.

Jupiter Helmets Inc.
Direct Materials Purchases Budget
For the Month Ending May 31
	Plastic	Foam Lining	Total
Units required for production:
Bicycle helmet
Motorcycle helmet
Plus desired units of inventory, May 31
Total
Less estimated units of inventory, May 1
Total units to be purchased
Unit price	$	$
Total direct materials to be purchased	$	$	$

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	$	$	$

5. Prepare a factory overhead cost budget for May.

Jupiter Helmets Inc.
Factory Overhead Cost Budget
For the Month Ending May 31
Indirect factory wages	$
Depreciation of plant and equipment
Power and light
Insurance and property tax
Total	$

Answer 1

1.

Jupiter Helmets Inc., Sales Budget For The Month Ending May 31
	Unit sales volume	Unit selling price	Total sales
Bicycle helmet	8,000	$24	$192,000
Motorcycle helmet	7,250	190	1,377,500
Total revenue from sales			$1,569,500

2.

Jupiter Helmets Inc., Production Budget For The Month Ending May 31
	Bicycle helmet units	Motorcycle helmet units
Expected units to be sold	8,000	7,250
Plus: Desired inventory, May 31	400	300
Total	8,400	7,550
Less: Estimated inventory, May 1	-200	-100
Total units to be produced	8,200	7,450

3.

Jupiter Helmets Inc., Direct Material Purchases Budget For The Month Ending May 31
	Plastic	Foam Lining	Total
Units required for production:
Bicycle helmet	7,380 (8,200*0.90)	1,640 (8,200*0.20)
Motorcycle helmet	26,075 (7,450*3.50)	10,430 (7,450*1.40)
Plus: Desired units of inventory, May 31	2,000	800
Total	35,455	12,870
Less: Estimated units of inventory, May 1	-1,480	-520
Total units to be purchased	33,975	12,350
Unit price	$4.40	$0.90
Total direct materials to be purchased	$149,490	$11,115	$160,605

4.

Jupiter Helmets Inc., Direct Labor Cost Budget For The Month Ending May 31
	Molding Department	Assembly Departement	Total
Hours required for production:
Bicycle helmet	2,460 (8,200*0.30)	820 (8,200*0.10)
Motorcycle helmet	3,725 (7,450*0.50)	2,980 (7,450*0.40)
Total	6,185	3,800
Hourly rate	$15	$14
Total direct labor costs	$92,775	$53,200	$145,975

5.

Jupiter Helmets Inc., Factory Overhead Cost Budget For The Month Ending May 31
Indirect factory wages	$125,000
Depreciation of plant and equipment	45,000
Power and light	23,000
Insurance and property tax	11,000
Total	$204,000