Question

Budgeted Income Statement and Supporting Budgets

The budget director of Gold Medal Athletic Co., 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 March:

Estimated sales for March:

Batting helmet	1,200 units at $40 per unit
Football helmet	6,500 units at $160 per unit

Estimated inventories at March 1:

Direct materials:
Plastic	90 lbs.
Foam lining	80 lbs.
Finished products:
Batting helmet	40 units at $25 per unit
Football helmet	240 units at $77 per unit

Desired inventories at March 31:

Direct materials:
Plastic	50 lbs.
Foam lining	65 lbs.
Finished products:
Batting helmet	50 units at $25 per unit
Football helmet	220 units at $78 per unit

Direct materials used in production:

In manufacture of batting helmet:
Plastic	1.2 lbs. per unit of product
Foam lining	0.5 lb. per unit of product
In manufacture of football helmet:
Plastic	3.5 lbs. per unit of product
Foam lining	1.5 lbs. per unit of product

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

Plastic	$6 per lb.
Foam lining	$4 per lb.

Direct labor requirements:

Batting helmet:
Molding Department	0.2 hr. at $20 per hr.
Assembly Department	0.5 hr. at $14 per hr.
Football helmet:
Molding Department	0.5 hr. at $20 per hr.
Assembly Department	1.8 hrs. at $14 per hr.

Estimated factory overhead costs for March:

Indirect factory wages	$86,000
Depreciation of plant and equipment	12,000
Power and light	4,000
Insurance and property tax	2,300

Estimated operating expenses for March:

Sales salaries expense	$184,300
Advertising expense	87,200
Office salaries expense	32,400
Depreciation expense—office equipment	3,800
Telephone expense—selling	5,800
Telephone expense—administrative	1,200
Travel expense—selling	9,000
Office supplies expense	1,100
Miscellaneous administrative expense	1,000

Estimated other income and expense for March:

Interest revenue	$940
Interest expense	872

Estimated tax rate: 30%

Required:

1. Prepare a sales budget for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Sales Budget For the Month Ending March 31
	Unit Sales Volume	Unit Selling Price			Total Sales
Batting helmet		$			$
Football helmet
Total revenue from sales					$

2. Prepare a production budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gold Medal Athletic Co. Production Budget For the Month Ending March 31
	Units
	Batting helmet	Football helmet
Expected units to be sold
Desired inventory, March 31
Total units available
Estimated inventory, March 1
Total units to be produced

3. Prepare a direct materials purchases budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gold Medal Athletic Co. Direct Materials Purchases Budget For the Month Ending March 31
		Plastic		Foam Lining		Total
Units required for production:
Batting helmet
Football helmet
Desired units of inventory, March 31
Total units available
Estimated units of inventory, March 1
Total units to be purchased
Unit price	$		$
Total direct materials to be purchased	$		$		$

4. Prepare a direct labor cost budget for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Direct Labor Cost Budget For the Month Ending March 31
		Molding Department		Assembly Department		Total
Hours required for production:
Batting helmet
Football helmet
Total
Hourly rate	$		$
Total direct labor cost	$		$		$

5. Prepare a factory overhead cost budget for March.

Gold Medal Athletic Co. Factory Overhead Cost Budget For the Month Ending March 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 March. Work in process at the beginning of March is estimated to be $15,300, and work in process at the end of March is desired to be $14,800. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Gold Medal Athletic Co. Cost of Goods Sold Budget For the Month Ending March 31
Finished goods inventory, March 1			$
Work in process inventory, March 1		$
Direct materials:
Direct materials inventory, March 1	$
Direct materials purchases
Cost of direct materials available for use	$
Direct materials inventory, March 1
Cost of direct materials placed in production	$
Direct labor
Factory overhead
Total manufacturing costs
Total work in process during period		$
Work in process inventory, March 31
Cost of goods manufactured
Cost of finished goods available for sale			$
Finished goods inventory, March 31
Cost of goods sold			$

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

Gold Medal Athletic Co. Selling and Administrative Expenses Budget For the Month Ending March 31
Selling expenses:
		$
Total selling expenses			$
Administrative expenses:
		$
Total administrative expenses
Total operating expenses			$

8. Prepare a budgeted income statement for March.

Gold Medal Athletic Co. Budgeted Income Statement For the Month Ending March 31
			$
			$
Operating expenses:
		$
Total operating expenses
Income from operations			$
Other revenue and expense:
		$
Income before income tax			$
Net income			$

Answer 1

• All working forms part of the answer
• Since there are more than 4 Requirements, the first 4 Requirements are solved below as per guidelines:

Gold Medal Athletic Co.
Sales Budget
For the Month Ending March 31
	Unit Sales	Unit Selling			Total Sales
	Volume	Price
Batting helmet	1200	$	40		$	48000
Football helmet	6500	$	160		$	1040000
Total revenue from sales						$	1088000

Gold Medal Athletic Co.
Production Budget
For the Month Ending March 31
	Units
	Batting helmet	Football helmet
Expected units to be sold	1200	6500
Desired inventory, March 31	50	220
Total units available	1250	6720
Estimated inventory, March 1	40	240
Total units to be produced	1210	6480

----Direct material purchase Budget (#3)

	Plastic	Foam Lining	Total
Units required for production:
Batting helmet	1452	605	2057
Football helmet	22680	9720	32400
Desired units of inventory, March 31	50	65	115
Total units available	24182	10390	34572
Estimated units of inventory, March 1	90	80	170
Total units to be purchased	24092	10310	34402
Unit price	$                             6.00	$                   4.00
Total direct materials to be purchased	$                   144,552.00	$           41,240.00	$             185,792.00

Direct Labor Cost Budget
For the Month Ending March 31
	Molding	Assembly	Total
Hours required for production:
Batting helmet	242	605	847
Football helmet	3240	11664	14904
Total	3482	12269	15751
Hourly rate	$                                                          20.00	$                                                          14.00
Total direct labor cost	$                                                   69,640.00	$                                                  171,766.00	$                                                                    241,406.00