The following information is available for 2018 for XYZ Products: Revenue (300,0
ID: 2527167 • Letter: T
Question
The following information is available for 2018 for XYZ Products:
Revenue (300,000 units) $2,400,000
Manufacturing costs:
Materials 400,000
Variable overhead cash costs 270,000
Fixed overhead cash costs 150,000
Depreciation 500,000
Marketing and administrative costs:
Marketing variable costs 300,000
Marketing depreciation 50,000
Administrative cash costs 200,000
Administrative depreciation 30,000
Total costs $1,900,000
Operating profits $ 500,000
All depreciation charges are expected to remain the same for 2019. Sales volume is expected to increase by 15 percent, but prices are expected to fall by 10 percent. Material costs are expected to decrease by 12 percent. Variable manufacturing overhead costs are expected to decrease by 4 percent. Fixed manufacturing overhead costs are expected to increase by 8 percent.
Variable marketing costs change with volume. Administrative cash costs are expected to increase by 16 percent. Inventories are kept at zero.
Required:
a) Prepare a budgeted income statement for 2019. Round budget line items to the nearest dollar. Computations are necessary
b)How might Kaizen budgeting have been used to prepare the 2019 pro forma income statement? No computations are necessary.
Explanation / Answer
a. XYZ Products
Budgeted Income Statement
For 2019
Revenue ( 300,000 x 115% x $ 8.00 x 90%) $ 2,484,000 Cost of Goods Sold Materials ( $ 400,000 x 115% x 88% ) 404,800 Variable Overhead ( $ 270,000 x 115% x 96%) 298,080 Fixed Manufacturing Overhead ( $ 150,000 x 108%) 162,000 Depreciation 500,000 1,364,880 Gross Profit 1,119,120 Marketing and Administrative Costs: Marketing Variable Costs 345,000 Marketing Depreciation 50,000 Administrative Cash Costs 232,000 Administrative Depreciation 30,000 657,000 Operating Profits 462,120Related Questions
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