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   • Learning Objective 4

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   Budgeted Income Statement and Supporting An accounting device used to plan and control resources of operational departments and divisions.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 One of the major elements of the income statement budget that indicates the quantity of estimated sales and the expected unit selling price.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 A budget of estimated unit production.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 A budget that uses the production budget as a starting point to budget materials purchases.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

Answer 1

• Requirement 1

Sales Budget
For the Month Ending January 31
	Unit Sales	Unit Selling	Total Sales
	Volume	Price
Birdhouse	6000	$55	$330,000
Bird feeder	4500	$75	$337,500
Total revenue from sales			$667,500

• Requirement 2

Production Budget
For the Month Ending January 31
		Units
		Birdhouse		Bird Feeder
Expected units to be sold		6000		4500
Plus desired inventory, January 31		340		200
Total		6340		4700
Less estimated inventory, January 1		300		240
Total units to be produced		6040		4460

• Requirement 3

Direct Materials Purchases Budget
For the Month Ending January 31
	Wood	Plastic	Total
Required units for production:
Birdhouse	4832	3020	7852
Bird feeder	5352	3345	8697
Plus desired units of inventory, January 31	180	210
Total	10364	6575
Less estimated units of inventory, January 1	220	250
Total units to be purchased	10144	6325
Unit price	$8.00	$1.20
Total direct materials to be purchased	$81,152	$7,590	$88,742