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Budgeted Income Statement and Supporting Budgets The budget director of Birds of a Feather Inc., with...

Budgeted Income Statement and Supporting Budgets

The budget director of Birds of a Feather Inc., 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 January:

Estimated sales for January:

  Bird house 6,000 units at $55 per unit
  Bird feeder 4,500 units at $75 per unit

Estimated inventories at January 1:

Direct materials:
  Wood 220 ft.
  Plastic 250 lbs.
Finished products:
  Bird house 300 units at $23 per unit
  Bird feeder 240 units at $34 per unit

Desired inventories at January 31:

Direct materials:
  Wood 180 ft.
  Plastic 210 lbs.
Finished products:
  Bird house 340 units at $23 per unit
  Bird feeder 200 units at $34 per unit

Direct materials used in production:

In manufacture of Bird House:
  Wood 0.80 ft. per unit of product
  Plastic 0.50 lb. per unit of product
In manufacture of Bird Feeder:
  Wood 1.20 ft. per unit of product
  Plastic 0.75 lb. per unit of product

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

  Wood $8.00 per ft.
  Plastic $1.20 per lb.

Direct labor requirements:

Bird House:
  Fabrication Department 0.20 hr. at $15 per hr.
  Assembly Department 0.30 hr. at $12 per hr.
Bird Feeder:
  Fabrication Department 0.40 hr. at $15 per hr.
  Assembly Department 0.35 hr. at $12 per hr.

Estimated factory overhead costs for January:

Indirect factory wages $80,000
Depreciation of plant and equipment 25,000
Power and light $8,000
Insurance and property tax 2,000

Estimated operating expenses for January:

Sales salaries expense $90,000
Advertising expense 20,000
Office salaries expense 18,000
Depreciation expense—office equipment 800
Telephone expense—selling 500
Telephone expense—administrative 200
Travel expense—selling 5,000
Office supplies expense 250
Miscellaneous administrative expense 450

Estimated other income and expense for January:

Interest revenue $300
Interest expense 224

Estimated tax rate: 30%

Required:

1. Prepare a sales budget for January.

Birds of a Feather Inc.
Sales Budget
For the Month Ending January 31
Unit Sales
Volume
Unit Selling
Price
Total Sales
Bird house
Bird feeder
Total revenue from sales $

2. Prepare a production budget for January.

Birds of a Feather Inc.
Production Budget
For the Month Ending January 31
Units
Bird House Bird Feeder
Expected units to be sold
Plus desired inventory, January 31
  Total
Less estimated inventory, January 1
Total units to be produced

3. Prepare a direct materials purchases budget for January.

Birds of a Feather Inc.
Direct Materials Purchases Budget
For the Month Ending January 31
Wood Plastic Total
Required units for production:
  Bird house
  Bird feeder
Plus desired units of inventory, January 31
Total
Less estimated units of inventory, January 1
Total units to be purchased
Unit price $ $
Total direct materials to be purchased $ $ $

4. Prepare a direct labor cost budget for January.

Birds of a Feather Inc.
Direct Labor Cost Budget
For the Month Ending January 31
Fabrication
Department
Assembly Department Total
Hours required for production:
Bird house
Bird feeder
Total
Hourly rate $ $
Total direct labor cost $ $ $

5. Prepare a factory overhead cost budget for January.

Birds of a Feather Inc.
Factory Overhead Cost Budget
For the Month Ending January 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 January. Work in process at the beginning of January is estimated to be $29,000, and work in process at the end of January is estimated to be $35,400.

Birds of a Feather Inc.
Cost of Goods Sold Budget
For the Month Ending January 31
Finished goods inventory, January 1
Work in process inventory, January 1
Direct materials:
  Direct materials inventory, January 1
  Direct materials purchases
  Cost of direct materials available for use
  Less: Direct materials inventory, January 31
  Cost of direct materials placed in production
Direct labor
Factory overhead
Total manufacturing costs
Total work in process during the period
Less: Work in process inventory, January 31
Cost of goods manufactured
Cost of finished goods available for sale
Less: Finished goods inventory, January 31
Cost of goods sold $

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

Birds of a Feather Inc.
Selling and Administrative Expenses Budget
For the Month Ending January 31
Selling expenses:
Sales salaries expense
Advertising expense
Telephone expense—selling
Travel expense—selling
Total selling expenses
Administrative expenses:
Office salaries expense
Depreciation expense—office equipment
Telephone expense—administrative
Office supplies expense
Miscellaneous administrative expense
Total administrative expenses
Total operating expenses $

8. Prepare a budgeted income statement for January.

Birds of a Feather Inc.
Budgeted Income Statement
For the Month Ending January 31
Revenue from sales
Cost of goods sold
Gross profit
Operating expenses:
Selling expenses
Administrative expenses
Total operating expenses
Income from operations
Other income:
Interest revenue
Other expenses:
Interest expense
Income before income tax
Income tax expense (30% rate)
Net income $

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