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

5.

Factory overhead cost budget
Indirect factory wages	86000
Depreciation of plant and equipment	12000
Power and light	4000
Insurance and property tax	2300
Total factory overhead cost	104300

6.

Cost of goods sold budget
Direct material purchases		185792
Add: Beginning inventory of raw material
Plastic	540
foam	320
Total		860
Total raw material available for use		186652
Less: Ending inventory of raw material
Plastic	300
foam	260
Total		560
Raw material used for production		186092
Direct labor		241406
Factory overhead		104300
Total manufacturing costs		531798
Cost of goods manufactured		531798
Add: Beginning inventory of finished goods		19480
Finished goods available for sale		551278
Less: Ending inventory of finished goods		18410
Cost of goods sold		532868

7.

Selling and administrative expenses budget
Selling Expenses:
Sales Salaries expesne	184300
Advertising expense	87200
Telephone expense - Selling	5800
Travel expense - Selling	9000
Selling Expenses		286300
Administrative expenses:
Office salaries expense	32400
Depreciation expense - ofice equipment	3800
Telephone expense - Admn.	1200
Office Supplies expense	1100
Miscellaneous expense	1000
Total Administrative Expenses		39500
Total operating expenses		325800

8.

Budgeted Income Statement
Sales Revenue		1088000
Less: Cost of goods sold		532868
Gross Profit		555132
Operating Expenses:
Selling expenses	286300
Administrative expenses	39500
Total Operating expenses		325800
Income from operations		229332
Other revenue and expenses
Interest revenue	940
Interest expense	-872	68
Income before income tax		229400
Income taxes (30%)		68820
Net income		160580