In: Accounting
During the first calendar quarter of 2019, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 6,000 units in the urban region at a unit price of $53 and 5,000 units in the rural region at $48 each. Because the sales manager expects the product to catch on, he has asked for production sufficient to generate a 4,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses:
Variable |
Fixed |
||||
---|---|---|---|---|---|
(per unit) |
(total) |
||||
Manufacturing costs: | |||||
Direct materials | |||||
A (4 lb. @ $3.15/lb.) | $12.60 | - | |||
B (2 lb. @ $4.65/lb.) | 9.30 | - | |||
Direct labor (0.5 hours per unit) | 7.50 | - | |||
Manufacturing overhead: | |||||
Depreciation | - | $7,650 | |||
Factory supplies | 0.90 | 4,500 | |||
Supervisory salaries | - | 28,800 | |||
Other | 0.75 | 22,950 | |||
Operating expenses: | |||||
Selling: | |||||
Advertising | - | 22,500 | |||
Sales salaries& commissions* | 1.50 | 15,000 | |||
Other* | 0.90 | 3,000 | |||
Administrative: | |||||
Office salaries | - | 2,700 | |||
Supplies | 0.15 | 1,050 | |||
Other | 0.08 | 1,950 |
*Varies per unit sold, not per unit produced.
a. Assuming that the desired ending inventories of materials A and B are 4,000 and 6,000 pounds, respectively, and that work-in-process inventories are immaterial, prepare budgets for the calendar quarter in which the new product will be introduced for each of the following operating factors:
Do not use negative signs with any of your answers below.
1. Total sales
$Answer
2. Production
Answer units
3. Material purchase cost
Material A | Material B | ||||
---|---|---|---|---|---|
Total pounds (lbs.) required for production | Answer | Answer | |||
Desired ending materials inventory | Answer | Answer | |||
Total pounds to be available | Answer | Answer | |||
Beginning materials inventory | Answer | Answer | |||
Total material to be purchased (lbs.) | Answer | Answer | |||
Total material purchases ($) | Answer | Answer |
4. Direct labor costs
$Answer
5. Manufacturing overhead costs
Fixed | Variable | Total | |||
---|---|---|---|---|---|
Depreciation | Answer | Answer | Answer | ||
Factory supplies | Answer | Answer | Answer | ||
Supervisory salaries | Answer | Answer | Answer | ||
Other | Answer | Answer | Answer | ||
Total manufacturing overhead | Answer |
6. Selling and administrative expenses
Fixed | Variable | Total | |||
---|---|---|---|---|---|
Selling expenses: | |||||
Advertising | Answer | Answer | Answer | ||
Sales salaries and commissions | Answer | Answer | Answer | ||
Other | Answer | Answer | Answer | ||
Total selling expenses | Answer | ||||
Administrative expenses: | |||||
Office salaries | Answer | Answer | Answer | ||
Supplies | Answer | Answer | Answer | ||
Other | Answer | Answer | Answer | ||
Total administrative expenses | Answer | ||||
Total selling and administrative expenses | Answer |
b. Using data generated in requirement (a), prepare a budgeted
income statement for the calendar quarter. Assume an overall
effective income tax rate of 30%.
Round answers to the nearest whole number.
Do not use negative signs with your answers.
Clinton Corporation Budgeted Income Statement For the Quarter Ended March 31, 2019 |
|||||
---|---|---|---|---|---|
Sales | Answer | ||||
Cost of Goods Sold: | |||||
Beginning Inventory - Finished Goods | Answer | ||||
Material: | |||||
Beginning Inventory - Material | Answer | ||||
Material Purchases | Answer | ||||
Material Available | Answer | ||||
Ending Inventory - Material | Answer | ||||
Direct Material | Answer | ||||
Direct Labor | Answer | ||||
Manufacturing Overhead | Answer | ||||
Total Manufacturing Cost | Answer | ||||
Cost of Goods Available for Sale | Answer | ||||
Ending Inventory - Finished Goods | Answer | ||||
Cost of Goods Sold | Answer | ||||
Gross Profit | Answer | ||||
Operating Expenses: | |||||
Selling Expenses | Answer | ||||
Administrative Expenses | Answer | ||||
Total Operating Expenses | Answer | ||||
Income before Income Taxes | Answer | ||||
Income Tax Expense | Answer | ||||
Net Income | Answer |
Answer-
a) | |||
1) Sales Budget: | |||
Sales in units = 6000 + 5000 = | 11000 | ||
Sales in $ = 6000*$53+5000*$48 = | 558000 | ||
2) Production Budget: | |||
Desired ending inventory | 4000 | ||
Sales | 11000 | ||
Total needs | 15000 | ||
Less: Beginning inventory | 0 | ||
Budgeted production for the quarter | 15000 | ||
3) Materials purchases cost: | Material A | Material B | Total |
Desired ending inventory (pounds) | 4000 | 6000 | |
Required for production | 60000 | 30000 | |
Total needs | 64000 | 36000 | |
Less: Beginning inventory | 0 | 0 | |
Budgeted purchases for the quarter | 64000 | 36000 | |
Unit cost | 3.15 | 4.65 | |
Material purchase cost | 201600 | 167400 | 369000 |
4) Direct Labor cost budget: | |||
Total direct labor hours needed = 15000*0.5 = | 7500 | ||
Direc labor cost at $15 per DLH | 112500 | ||
5) Manufacturing overhead costs: | |||
Depreciation | 7650 | ||
Factory supplies = 4500+0.90*15000 = | 18000 | ||
Supervisory salaries | 28800 | ||
Other = 22950 + 0.75*15000 = | 34200 | ||
Total manufacturing overhead | 88650 | ||
6) Selling and administrative expenses: | |||
Selling expenses: | |||
Advertising | 22500 | ||
Sales salaries and commissions = 15000+11000*1.5 = | 31500 | ||
Other = 3000 + 0.9*11000 = | 12900 | ||
Total selling expenses | 66900 | ||
Administrative expenses: | |||
Office salaries | 2700 | ||
Supplies = 1050+15000*0.15 = | 3300 | ||
Other = 1950+0.08*15000 = | 3150 | ||
Total administrative expenses | 9150 | ||
Total selling and administrative expenses | 76050 | ||
b) Budgeted Income statement: | |||
Sales | 558000 | ||
Cost of goods sold | 388410 | ||
Gross profit | 169590 | ||
Selling and administrative expenses | 76050 | ||
Income before tax | 93540 | ||
Income tax at 30% | 28062 | ||
Net Income | 65478 | ||
Cost of goods produced: | |||
Direct materials = 60000*3.15+30000*4.65 = | 328500 | ||
Direct labor | 112500 | ||
Manufacturing overheads | 88650 | ||
Cost of production | 529650 | ||
Less: ending inventory = 529650*4000/15000 = | 141240 | ||
Cost of goods sold | 388410 |