Question

The following information is available for year 1 for Pepper Products:

  

Sales revenue (250,000 units)	$	5,750,000
Manufacturing costs
Materials	$	338,000
Variable cash costs		287,000
Fixed cash costs		661,000
Depreciation (fixed)		2,016,000
Marketing and administrative costs
Marketing (variable, cash)		852,000
Marketing depreciation		302,000
Administrative (fixed, cash)		1,027,000
Administrative depreciation		151,000
Total costs	$	5,634,000
Operating profits	$	116,000

   
All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to fall by 4 percent, but prices are expected to rise by 11 percent. Material costs per unit are expected to increase by 7 percent. Other unit variable manufacturing costs are expected to decrease by 6 percent per unit. Fixed cash costs are expected to increase by 3 percent.

  

Variable marketing costs will change with unit volume. Administrative cash costs are expected to increase by 3 percent. Inventories are kept at zero. Pepper Products operates on a cash basis.

Required:

Prepare a budgeted income statement for year 2. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amounts.)

Answer 1

Answer-:

     Pepper products

Budget income statement for year 2

Particular	Amount $	Notes to accounts
Sales Revenue	61,27,200	(5,75,000÷2,50,000) * 111%*2,50,000*96%
Manufacturing Costs
Materials	3,61,660	3,38,000*107%
Depreciation (Fixed)	20,16,000
Fixed Cash Costs	6,80,830	6,61,000*103%
Other Variable Costs	2,69,780	287000*94%
Total Manufacturing Costs	33,28,270
Marketing and Administrative Costs
Marketing (Variable, Cash)	8,17,920	8,52,000*96%
Marketing Depreciation	3,0,2000
Administrative (Fixed, Cash)	10,57,810	10,27,000*103%
Administrative Depreciation	1,51,000
Total Marketing and Administrative Costs	23,28,730
Total Costs	56,57,000
Operating Profit	4,70,200

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