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%

Required:

1. Prepare a sales budget for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Sales Budget For the Month Ending March 31
	Unit Sales Volume	Unit Selling Price			Total Sales
Batting helmet		$			$
Football helmet
Total revenue from sales					$

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

Gold Medal Athletic Co. Production Budget For the Month Ending March 31
	Units
	Batting helmet	Football helmet

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

Gold Medal Athletic Co. Direct Materials Purchases Budget For the Month Ending March 31
		Plastic		Foam Lining		Total
Units required for production:
Batting helmet
Football helmet
Desired units of inventory, March 31
Total units available
Estimated units of inventory, March 1
Total units to be purchased
Unit price	$		$
Total direct materials to be purchased	$		$		$

4. Prepare a direct labor cost budget for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Direct Labor Cost Budget For the Month Ending March 31
		Molding Department		Assembly Department		Total
Hours required for production:
Batting helmet
Football helmet
Total
Hourly rate	$		$
Total direct labor cost	$		$		$

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

1.

Sales Budget
	Unit sales volume	Unit selling price	Total Sales
Batting Helmet	1200	40	48000
Footbal Helmet	6500	160	1040000
Total Revenue			1088000

2.

Production Budget
	Batine Helmet	Football Helmet
Budgeted sales unit	1200	6500
Ending Inventory	50	220
Total units needed	1250	6720
Beginning Inventory	-40	-240
Budgeted Production	1210	6480

3.

Direct Material Purchases Budget
	Plastic	Foam lining	Total
Units required for production
Batting Helmet	1452	605
Football Helmet	22680	9720
Desired inventory , March 31	50	65
Total units needed	22730	9785
Inventory , March 1	90	80
Budgeted Purchases	22640	9705
Unit Price	6	4
Total Direct material to be purchased	135840	38820	174660

4.

Direct labor cost budget
	Molding	Assembly	Total
Hours required for production:
Batting Helmet	242	605	847
Football Helmet	3240	11664	14904
Total hours required	3482	12269
Direct labor cost per hour	20	14
Budgeted Direct labor cost	69640	171766	241406

5.

Factory overhead budget
Item	Amount
Indirect factory wages	86000
Depreciation of plant andequipment	12000
Power and light	4000
Insurance andproperty tax	2300
	104300

6.

Cost of goods sold budget
Beginning Raw Material:
Plastic	540
Foam	320	860
Add: Purchases		174660
Raw material available for use		175520
Less: Ending Raw Material:
Plastic	450
Foam	260	710
Raw material used for production		174810
Direct labor		241406
Manufacturing overheads		104300
Total manufacturing cost		345706
Cost of goods manufactured		345706
AdD: Beginning Finished goods
Batting Helmet	1000
Football Helmet	18480	19480
Finished Goods Available for Sale		365186
Less: Ending Finished goods
Batting Helmet	1250
Football Helmet	17160	18410
Cost of goods sold		346776