Question

Jones Corporation has the following budgeted sales for the selected four-month period:

Month	Unit Sales
July	35,000
August	20,000
September	30,000
October	25,000

	Sales price per unit is $200
	Plans are to have an inventory of finished product equal to 30% of the unit sales for the next month. There was 10,500 units in beginning inventory on July 1st.
	Five pounds of materials are required for each unit produced. Each pound of material costs $10. Inventory levels for materials equal 20% of the production needs for the next month.
	Desired ending inventory for September is 30,500 pounds of material. Beginning inventory for July was 25,000 pounds of material.
	Each unit requires 2 hours of direct labor and the average wage rate is $20 per hour.
	Variable overhead rate is $5 per direct labor hour. There is also fixed overhead of $40,000 per month.
	The company pays a 2% commission on sales.
	Company has fixed selling and administrative expenses as follows: Rent                      $10,000/month Utilities                   $2,000/month Advertising               $500/month Office Salaries     $25,500/month E. Prepare an overhead budget for July, August and September and in total for the quarter. F. Prepare a selling and administrative expenses budget for July, August and September and in total for the quarter. G. Prepare an ending finished goods inventory budget for the quarter (Hint: You have already calculated the desired ending finished goods inventory amount. Assume a stable per unit rate and round the per unit fixed factory overhead rate to two decimal places.) H. Prepare a cost of goods sold budget for the quarter I. Prepare a budged operating income statement for the quarter- three months together

Answer 1

Selling & Administrative Expense Budget
	July	August	September
Rent	$10,000.00	$10,000.00	$10,000.00
Utilities	$2,000.00	$2,000.00	$2,000.00
Advertising	$500.00	$500.00	$500.00
Office Salaries	$25,500.00	$25,500.00	$25,500.00
Selling Commission ( 10% of Sales)	$3,500.00	$2,000.00	$3,000.00
Total	$41,500.00	$40,000.00	$41,000.00

Overhead Budget
	July	August	September
Unit Sales	35000	20000	30000
Closing Inventory	6000	9000	7500
Less: Beginning Inventory	10500	6000	9000
Unit Produced	30500	23000	28500
Labour Hour require/Unit	2	2	2
Labour Hour Required	61000	46000	57000
Variable Overhead /Hour	$5	$5	$5
Variable Overhead (1)	$305,000	$230,000	$285,000
Fixed Overhead(2)	$40,000	$40,000	$40,000
Total Overhead (1+2)	$345,000	$270,000	$325,000

Ending Finished Foods Inventory Budget
	July	August	September
Unit Sales	35000	20000	30000
Closing Inventory	$6,000.00	$9,000.00	$7,500.00
Manufacturing Cost /Unit	$81.33	$81.33	$81.33
Finished Goods inventory'	$487,980.00	$731,970.00	$609,975.00

Computation of Manufacturing Cost/Unit
	Per Unit/Cost
Direct Material Cost 5 Pound X $10/Pound)	$50.00
Direct Labour (2 HoursX $20)	$20.00
Variable Overhead ( 2 HourX $5)	$10.00
Applied Fixed Overhead ( $40000/30000 Unit**)	$1.33
Manufacturing Cost/Unit	$81.33