Question

Step 5: Manufacturing Overhead Budget

Buff Company expects variable overhead costs to fluctuate with production volume according to the following rates:

Indirect materials: $0.90 per direct labor

Indirect labor: $1.70 per direct labor

Utilities: $0.30 per direct labor

Maintenance: $0.10 per direct labor

Buff Company also incurs fixed overhead costs. The amounts of fixed overhead costs are already provided in the budget below. Use this information to complete the manufacturing overhead budget.

Buff Company Manufacturing Overhead Sales Budget

For the year ending December 31, 2017

Variable costs Indirect materials ($0.90/hour) Q1_________ Q2_________ Q3_________ Q4_________

Indirect labor ($1.70/hour) Q1_________ Q2_________ Q3_________ Q4_________

Utilities ($0.30/hour) Q1_________ Q2_________ Q3_________ Q4_________

Maintenance ($0.10/hour) Q1_________ Q2_________ Q3_________ Q4_________

Total variable costs Q1_________ Q2_________ Q3_________ Q4_________

Fixed costs

Supervisory salaries Q1 $37,600 Q2 $37,600 Q3 $37,600 Q4 $37,600 Total in a year $150400

Depreciation Q1 $2,900 Q2 $2,900 Q3 $2,900 Q4 $2,900 Total in a year $11600

Property taxes and insurance Q1 $1,600 Q2 $1,600 Q3 $1,600 Q4 $1,600 Total in a year $6,400

Maintenance Q1 $3,400 Q2 $3,400 Q3 $3,400 Q4 $3,400Total in a year $13,600

Total fixed costs Q1_________ Q2_________ Q3_________ Q4_________

Total manufacturing overhead Q1_________ Q2_________ Q3_________ Q4_________

Direct labor hours Q1_________ Q2_________ Q3_________ Q4_________

Using the yearly amounts, what is the annual budgeted overhead rate per direct labor hour?

Step 6: Selling and Administrative Expense Budget

Buff Company expects variable selling and administrative expenses to fluctuate with unit sales volume according to the following rates:

Sales commission $3.60 per unit sold

Freight-out: $2.80 per unit sold

Buff Company also incurs fixed selling and administrative expenses. The amounts of fixed selling and administrative expenses are already provided in the budget below. Use this information to complete the selling and admin. expense budget

Buff Company Selling and Admi Sales Budget For the year ending December 31, 2017

Budgeted sales in units Q1 1,800 Q2 1,700 Q3 2,300 Q4 2,800 Total in a year 8,600

Variable expenses

Sales commissions ($3.60 per unit) Q1_________ Q2_________ Q3_________ Q4_________

Freight-out ($2.80 per unit) Q1_________ Q2_________ Q3_________ Q4_________

Total variable expenses Q1_________ Q2_________ Q3_________ Q4_________

Fixed expenses Advertising Q1 $3,200 Q2 $3,200 Q3 $3,200 Q4 $3,200 Total in a year $12,800

Sales salaries Q1 $13,600 Q2 $13,600 Q3 $13,600 Q4 $13,600 Total in a year $54,400

Office salaries Q1 $7,000 Q2 $7,000 Q3 $7,000 Q4 $7,000 Total in a year $28,000

Depreciation Q1 $800 Q2 $800 Q3 $800 Q4 $800 Total in a year $3,200

Property taxes and insurance Q1 $1,000 Q2 $1,000 Q3 $1,000 Q4 $1,000 Total in a year $4,000

Total fixed expenses Q1_________ Q2_________ Q3_________ Q4_________

Total selling and administrative expenses Q1_________ Q2_________ Q3_________ Q4_________

Step 7: Budgeted Income Statement

Complete the following schedule to determine the cost of goods sold:

Cost to produce one product

Direct materials Quantity 1.50 Unit cost $1.00

Direct labor Quantity 2.50 Unit cost $12.00

Manufacturing overhead Quantity 2.50

Total unit cost _________

Cost of goods sold

Total Unit cost × Number of units budgeted to be sold during 2017 = Budgeted Cost of Goods Sold________

Additional information:

Interest expense for 2017: $1,000

Income tax expense for 2017: $16,500

Use the information above as well as data from the other operating budgets to complete the Budgeted Income Statement

Buff Company Budgeted Income Statement For the Year Ending December 31, 2017

Sales________

Cost of goods sold_______

Gross profit_______

Selling and administrative expenses______

Income from operations________

Interest expense______

Income before income taxes______

Income tax expense_______

Net income_______

Answer 1

Buff Company
Manufacturing Overhead Budget
For the year ending December 31, 2017
Variable Cost	Q1	Q2	Q3	Q4	Year
Indirect materials: $0.90 per direct labor	4050	3825	5175	6300	19350
Indirect labor: $1.70 per direct labor	7650	7225	9775	11900	36550
Utilities: $0.30 per direct labor	1350	1275	1725	2100	6450
Maintenance: $0.10 per direct labor	450	425	575	700	2150
Total Variable Cost	13500	12750	17250	21000	64500
Fixed Cost
Supervisory salaries	37600	37600	37600	37600	150400
Depreciation	2900	2900	2900	2900	11600
Property taxes and insurance	1600	1600	1600	1600	6400
Maintenance	3400	3400	3400	3400	13600
Total fixed costs	45500	45500	45500	45500	182000
Total manufacturing overhead	59000	58250	62750	66500	246500
Direct labor hours	4500	4250	5750	7000	21500
Using the yearly amounts, what is the annual budgeted overhead rate per direct labor hour?
246500/21500=11.47 per direct Labor hr

Buff Company
Selling and Administrative Expense Budget
For the year ending December 31, 2017
	4500	4250	5750	7000	Year
Sales commission $3.60 per unit sold	6480	6120	8280	10080	30960
Freight-out: $2.80 per unit sold	5040	4760	6440	7840	24080
Total variable expenses	11520	10880	14720	17920	55040
Fixed expenses Advertising	3200	3200	3200	3200	12800
Sales salaries	13600	13600	13600	13600	54400
Office salaries	7000	7000	7000	7000	28000
Depreciation	800	800	800	800	3200
Property taxes and insurance	1000	1000	1000	1000	4000
Total fixed expenses	25600	25600	25600	25600	102400
Total selling and administrative expenses	37120	36480	40320	43520	157440

Direct materials Quantity 1.50 Unit cost $1.00	1.00
Direct labor Quantity 2.50 Unit cost $12.00	12.00
Manufacturing overhead Quantity 2.50	28.66
Total unit cost	41.66

Cost of goods sold =8600*Total unit cost

3,58,300.00

Since you have not given the sales price per units sold a partial income statement is prepared (Formula to arrive at net income is also provided)

Income Statement
Sales 8600*Sales Price
Cost of goods sold	3,58,300.00
Gross profit (Sales-gross Profit)
Selling and administrative expenses	157440
Income from operations (Gross Profit-157440)
Interest expense	1,000
Income before income taxes (Income from operations-1000)
Income tax expense	16,500
Net income (Income before income taxes-16500