Budgeted Income Statement and Supporting Budgets The budget director of Birds of

Question

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:

Estimated inventories at January 1:

Desired inventories at January 31:

Direct materials used in production:

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

Direct labor requirements:

Estimated factory overhead costs for January:

Estimated operating expenses for January:

Estimated other income and expense for January:

Estimated tax rate: 30%

Required:

5. Prepare a factory overhead cost budget for January.

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.

7. Prepare a selling and administrative expenses budget for January.

8. Prepare a budgeted income statement for January.

Explanation / Answer

Requirement 1 Sales budget for January 2010 Birds of Feather Inc. Sales Budget For the Month Ending January 31 Unit Sales Unit Selling Total Sales Volume Price Bird House 6000 55 330000 Bird Feeder 4500 75 337500 Total revenue from sales 667500 2 Production Budget for January Birds of Feather Inc. Production Budget For the Month Ending January 31 Bird House Bird Feeder Expected units to be sold 6000 4500 Desired inventory January 31 340 200 Total units available 6340 4700 Estimated inventory January 1 300 240 Total units to be produced 6040 4460 3 Direct Material Purchase Budget for January Birds of Feather Inc. Direct Materials Purchases Budget For the Month Ending January 31 Wood Plastic Required units for production: Bird House 4832 3020 Bird Feeder 5352 3345 Desired units of inventory January 31 180 210 Total units available 10364 6575 Estimated units of inventory January 1 220 250 Total units to be purchased 10144 6325 Unit price 8 1.2 Total direct materials to be purchased 81152 7590 4 Direct Labor budget for January Birds of Feather Inc. Direct Labor Cost Budget For the Month Ending January 31 Fabrication Assembly 1 2 Hours required for production: Bird House 1208 1812 Bird Feeder 1784 1561 Total 2992 3373 Hourly rate 15 12 Total direct labor cost 44880 40476 Requirement 5 Birds of Feather Inc. Factory overhead cost budget For the Month Ending January 31 Indirect factory wages 80000 Depreciation of plant & Equipemnt 25000 Power & Light 8000 Insurance & property tax 2000 Total 115000 Birds of Feather Inc., Cost of goods sold Budget For the Month Ending January 31 Total Amount Direct Material Wood Plastic Opening stock 1760 300 Add : Purchases 81152 7590 Less : closing stock 1440 252 Direct Material consumed 81472 7638 89110 Direct Labor Dept. 1 Dept. 2 44880 40476 85356 Factory Overhead Indirect factory wages 80000 Depreciation of plant & Equipemnt 25000 Power & Light 8000 Insurance & property tax 2000 Total manufacturing costs 289466 Total work in process during the period 289466 Cost of goods manufactured 289466 Add : Beginning Finished goods Inventory Bird House Bird Feeder 6900 8160 15060 Cost of finished goods available for sale 304526 Less : Ending finished goods inventory Bird House Bird Feeder 7820 6800 14620 Cost of goods sold 289906 Birds of Feather Inc., Selling and administrative expenses budget For the Month Ending January 31 Selling expenses: Sales salaries expense 90000 Advertising expense 20000 Telephone expense—selling 500 Travel expense—selling 5000 Total selling expenses 115500 Administrative expenses: Office salaries expense 18000 Depreciation expense—office equipment 800 Telephone expense—administrative 200 Office supplies expense 250 Miscellaneous administrative expense 450 Total administrative expenses 19700 Total operating expenses 135200 Birds of Feather Inc., Budgeted Income statement For the Month Ending January 31 Sales 667500 Cost of goods sold -289906 Gross Margin 377594 Operating Expenses Selling expenses 115500 Administrative expenses 19700 Total operating expenses -135200 Operating Income 242394 Other Income 300 242694 Other expenses -224 Net Income before taxes 242470 Incometax expense @30% -72741 Net Income 169729

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