In: Accounting
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 | $ |
(1) Sales Budget for January:-
Sales Volume |
SP |
Total Sale |
|
Bird House |
6000 |
55 |
330000 |
Bird Feeder |
4500 |
75 |
337500 |
Total revenue from Sale |
667500 |
(2) Production Budget for January
Bird House |
Feeder |
|
Expected units sold |
6000 |
4500 |
(+)Desired inventory (31 Jan) |
340 |
200 |
Total |
6340 |
4700 |
(-)Estimated Inventory (1 Jan) |
300 |
240 |
Total units to be produced |
6040 |
4460 |
(3) Direct material Purchase Bdt
Wood |
Plastic |
Total |
|
Required units for production:- |
|||
House |
(0.8*6040) =4832 |
7248 |
|
Feeder |
2230 |
3345 |
|
(+) Inventory (31 Jan) |
180 |
210 |
|
Total |
7242 |
10803 |
|
Inventory (1 Jan) |
220 |
250 |
|
Total unit purchase |
7022 |
10553 |
|
Unit Price |
8 |
1.2 |
|
Total DM to be purchased |
56176 |
12663.6 |
68839.6 |
(4)
Fabric |
Assembaly |
total |
|
Hrs for prod:- |
|||
House |
1208 |
1812 |
|
Feeder |
1784 |
1561 |
|
Total |
2992 |
3373 |
|
Hr rate |
15 |
12 |
|
Total |
44880 |
40476 |
85356 |