Question

Budgeted Income Statement and Supporting Budgets

The budget director of Feathered Friends 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 December:

1. Estimated sales for December:

   Bird house	3,200 units at $50 per unit
   Bird feeder	3,000 units at $70 per unit

2. Estimated inventories at December 1:

   Direct materials:
   Wood	200 ft.
   Plastic	240 lbs.
   Finished products:
   Bird house	320 units at $27 per unit
   Bird feeder	270 units at $40 per unit

3. Desired inventories at December 31:

   Direct materials:
   Wood	220 ft.
   Plastic	200 lbs.
   Finished products:
   Bird house	290 units at $27 per unit
   Bird feeder	250 units at $41 per unit

4. 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

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

   Wood	$7.00 per ft.
   Plastic	$1.00 per lb.

6. Direct labor requirements:

   Bird House:
   Fabrication Department	0.20 hr. at $16 per hr.
   Assembly Department	0.30 hr. at $12 per hr.
   Bird Feeder:
   Fabrication Department	0.40 hr. at $16 per hr.
   Assembly Department	0.35 hr. at $12 per hr.

7. Estimated factory overhead costs for December:

   Indirect factory wages	$75,000
   Depreciation of plant and equipment	23,000
   Power and light	6,000
   Insurance and property tax	5,000

8. Estimated operating expenses for December:

   Sales salaries expense	$70,000
   Advertising expense	18,000
   Office salaries expense	21,000
   Depreciation expense—office equipment	600
   Telephone expense—selling	550
   Telephone expense—administrative	250
   Travel expense—selling	4,000
   Office supplies expense	200
   Miscellaneous administrative expense	400

9. Estimated other income and expense for December:

   Interest revenue	$200
   Interest expense	122

10. Estimated tax rate: 30%

Required:

1. Prepare a sales budget for December.

Feathered Friends Inc. Sales Budget For the Month Ending December 31
	Unit Sales Volume	Unit Selling Price	Total Sales
Bird house
Bird feeder
Total revenue from sales

2. Prepare a production budget for December. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Feathered Friends Inc. Production Budget For the Month Ending December 31
	Units
		Bird House		Bird Feeder

3. Prepare a direct materials purchases budget for December. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Feathered Friends Inc. Direct Materials Purchases Budget For the Month Ending December 31
	Wood	Plastic	Total
Required units for production:
Bird house
Bird feeder
Desired units of inventory, December 31
Total units available
Estimated units of inventory, December 1
Total units to be purchased
Unit price
Total direct materials to be purchased

4. Prepare a direct labor cost budget for December.

Feathered Friends Inc. Direct Labor Cost Budget For the Month Ending December 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 December.

Feathered Friends Inc. Factory Overhead Cost Budget For the Month Ending December 31
	$
Total factory overhead cost	$

6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be $29,000, and work in process at the end of December is estimated to be $35,400. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Feathered Friends Inc. Cost of Goods Sold Budget For the Month Ending December 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 December.

Feathered Friends Inc. Selling and Administrative Expenses Budget For the Month Ending December 31
Selling expenses:
		$
Total selling expenses			$
Administrative expenses:
		$
Total administrative expenses
Total operating expenses			$

8. Prepare a budgeted income statement for December. In the Other revenue and expense section, indicate expenses as negative amounts.

Feathered Friends Inc. Budgeted Income Statement For the Month Ending December 31
			$
			$
Operating expenses:
		$
Total operating expenses
Income from operations			$
Other revenue and expense:
		$
Income before income tax			$
Net income			$

Answer 1

Ans. 1	Birding Homes & Feeders Inc.
	Sales Budget
	For the Month Ending January 31
		Unit Sales Volume (a)	Unit Selling Price (b)	Total Sales (a*b)
	Bird house	3200	$50	$160,000
	Bird feeder	3000	$70	$210,000
	Total revenue from sales			$370,000
Ans. 2	Birding Homes & Feeders Inc.
	Production Budget
	For the Month Ending January 31
	Particulars	Bird house	Bird feeder
	Expected units to be sold	3200	3000
	Add: Desired ending finished inventory	290	250
	Total required units	3490	3250
	Less: Beginning finished inventory units	-320	-270
	Units to be produced	3170	2980
Ans. 3	Birding Homes & Feeders Inc.
	Direct Materials Purchases Budget
	For the Month Ending January 31
		Wood	Plastic	Total
	Required units for production:
	Bird house	2536	1585
	Bird feeder	3576	2235
	Add: Desired units of ending materials inventory	220	200
	Total units available	6332	4020
	Less: Estimated beginning materials inventory	-200	-240
	Total units to be purchased	6132	3780
	(*) Unit price	$7.00	$1.00
	Total direct materials to be purchased	$42,924	$3,780	$46,704
	*Calculations:
	Required units for production =   Units produced * Materials required per unit
		Wood	Plastic
	Required units for production:
	Bird house	3,170 * 0.80 ft	3,170 * 0.50 lb
	Bird feeder	2,980 * 1.20 ft	2,980 * 0.75 lb
Ans. 4	Birding Homes & Feeders Inc.
	Direct Labor Cost Budget
	For the Month Ending January 31
		Fabrication Department	Assembly Department	Total
	Hours required for production:
	Bird house	634	951
	Bird feeder	1192	1043
	Total	1826	1994
	(*) Hourly rate	$16.00	$12.00
	Total direct labor cost	$29,216	$23,928	$53,144
	*Calculations:
	Hours required for production = Units produced * Direct labor hours per unit
		Fabrication Department	Assembly Department
	Hours required for production:
	Bird house	3,170 * 0.20 hr.	3,170 * 0.30 hr.
	Bird feeder	2,980 * 0.40 hr.	2,980 * 0.35 hr.