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%

5. Prepare a factory overhead cost budget for March.

Gold Medal Athletic Co. Factory Overhead Cost Budget For the Month Ending March 31
	$
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
			$
		$
Direct materials:
	$
Cost of direct materials available for use	$
Cost of direct materials placed in production	$
Total manufacturing costs
Total work in process during period		$
Cost of goods manufactured
Cost of finished goods available for sale			$
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

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GOLD MEDAL ATHLETIC CO.
Cost of Goods Sold Budget
For the Month Ending March 31,
Finished goods inventory, March 1,								$      19,480
Work in process, March 1,						$       15,300
Direct materials:
Direct materials inventory, March 1,				$          860
Direct materials purchases				185,792
Cost of direct materials available for use				$    186,652
Direct materials inventory, March 31,				560
Cost of direct materials placed in production				$    186,092
Direct labor				241,406
Factory overhead				104,300
Total manufacturing costs						531,798
Total work in process during period						$     547,098
Work in process, March 31, 2014						14,800
Cost of goods manufactured								532,298
Cost of finished goods available for sale								$    551,778
Finished goods inventory, March 31,								18,410
Cost of goods sold								$    533,368
Supporting calculations:
				Units		Cost		Total
Finished goods inventory, March 1,:
	Batting helmet			40		$25.00		$       1,000
	Football helmet			240		$77.00		18,480
	Total							$      19,480
Finished goods inventory, March 31,:
	Batting helmet			50		$25.00		$       1,250
	Football helmet			220		$78.00		17,160
	Total							$      18,410
Direct materials inventory, March 1,
	Plastic			90		$6.00		$          540
	Foam lining			80		$4.00		320
	Total							$          860
Direct materials inventory, March 31,
	Plastic			50		$6.00		$          300
	Foam lining			65		$4.00		260
	Total							$          560

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