Question

Budgeted income statement and supporting budgets for three months

Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year:

a. Estimated sales at $125 per unit:

January	25,000	units
February	30,000	units
March	45,000	units
April	50,000	units

b. Estimated finished goods inventories:

January 1	2,000	units
January 31	10%	of next month’s sales
February 28	10%	of next month’s sales
March 31	10%	of next month’s sales

c. Work in process inventories are estimated to be insignificant (zero).

d. Estimated direct materials inventories:

January 1	1,000	lbs.
January 31	1,500	lbs.
February 28	2,000	lbs.
March 31	2,500	lbs.

e. Manufacturing costs:

	Per Unit
Direct materials (0.8 lb. per unit × $15 per lb.)	$ 12
Direct labor (2.5 hrs. per unit × $24 per hr.)	60
Variable factory overhead ($1.20 per direct labor hour)	3
Fixed factory overhead ($200,000 per month, allocated using 40,000 units)	5
Total per-unit manufacturing costs	$80

f. Selling expenses:

Variable selling expenses	$4	per unit
Fixed selling expenses	$150,000
Administrative expenses (all fixed costs)	$400,000

6. Prepare a cost of goods sold budget for March.

Bellaire Inc.
Cost of Goods Sold Budget
For the First Quarter Ending March 31
	January	February	March	First Quarter
Beginning finished goods inventory	$	$	$	$
Cost of goods manufactured:
	$	$	$	$
Total cost of goods manufactured	$	$	$	$
	$	$	$	$
	$	$	$	$

Feedback

The cost of goods sold budget combines the budgeted costs from the direct labor, direct materials, and factory overhead budgets with estimated beginning and ending inventory to estimate a total cost of goods sold.

7. Prepare a selling and administrative expenses budget for March. Enter all amounts as positive number.

Bellaire Inc.
Selling and Administrative Expenses Budget
For the First Quarter Ending March 31
	January	February	March	First Quarter
Selling expenses:
	x$	x$	x$	x$
Total variable selling expenses	$	$	$	$
Total selling expenses	$	$	$	$
Administrative expenses:
Total selling and administrative expenses	$	$	$	$

8. Prepare a budgeted income statement with budgeted operating income for March.

Bellaire Inc.
Budgeted Income Statement
For the First Quarter Ending March 31
	January	February	March	First Quarter
	$	$	$	$
Gross profit	$	$	$	$
Selling and administrative expenses:
	$	$	$	$
Total selling and administrative expenses	$	$	$	$
	$	$	$	$

Answer 1

6	Bellaire Inc.
	Cost of Goods Sold Budget
	For the First Quarter Ending March 31
					January	February	March	First Quarter
	Beginning finished goods inventory			(Note:1)	160000	240000	360000
	Cost of goods manufactured			(Note:2)	2080000	2520000	3640000
	Total cost of goods manufactured				2240000	2760000	4000000
	Less:Ending finished goods inventory			(Note:3)	240000	360000	400000
	Cost of goods sold				2000000	2400000	3600000	8000000
	Note:1
					January	February	March
	Beginning finished goods inventory			a	2000	3000	4500
	Total per-unit manufacturing costs			b	80	80	80
	Copst of beginning finished goods inventory			a*b	160000	240000	360000
	Note:2
	Cost of goods manufactured:
					January	February	March	First Quarter
	Estimated sales in units				25000	30000	45000
	Add:Ending finished goods inventory				3000	4500	5000
	(10% of next month’s sales)				(30000*10%)	(45000*10%)	(50000*10%)
					28000	34500	50000
	Less:Beginning finished goods inventory				2000	3000	4500
	Units manufactured			a	26000	31500	45500	103000
	Total per-unit manufacturing costs			b	80	80	80
	Cost of goods manufactured			a*b	2080000	2520000	3640000	8240000
	Note:3
					January	February	March
	Ending finished goods inventory			a	3000	4500	5000
	Total per-unit manufacturing costs			b	80	80	80
	Copst of beginning finished goods inventory			a*b	240000	360000	400000
7	Bellaire Inc.
	Selling and Administrative Expenses Budget
	For the First Quarter Ending March 31
					January	February	March	First Quarter
	Selling expenses:
	Estimated sales in units			a	25000	30000	45000
	Variable selling expenses per unit			b	4	4	4
	Total variable selling expenses			c=a*b	100000	120000	180000