Budgeted Income Statement and Supporting Budgets The budget director of Gold Med

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:

Estimated inventories at March 1:

Desired inventories at March 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 March:

Estimated operating expenses for March:

Estimated other income and expense for March:

Estimated tax rate: 30%

Required:

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

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

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.

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

5. Prepare a factory overhead cost budget for March.

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.

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

8. Prepare a budgeted income statement for March.

Batting helmet 1,200 units at $40 per unit Football helmet 6,500 units at $160 per unit

Explanation / Answer

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1. Sales Budget Unit Sales Unit Selling Price Total Sale Batting Helmet 1200 40 48000 Football Helmet 6500 160 1040000 Total Revenue from Sale 1088000 2. Production Budget Batting Helmet Football Helmet Expected units to be sold 1200 6500 Desired Inventory, March 31 50 220 Total units Available 1250 6720 Estimated Inventory , March 1 -40 -240 Total Units to be produced 1210 6480 3. Direct Material Purchases Budget Plastic Foam Lining Total Required units for production: Batting Helmet 1452 605 2057 Football Helmet 22680 9720 32400 Desired Inventory, March 31 50 65 115 Total units Available 24182 10390 34572 Estimated Inventory , March 1 -90 -80 -170 Total Units to be purchased 24092 10310 34402 Unit Price 6 4 Total Direct Materials to be purchased 144552 41240 185792 4.Direct Labor Cost Budget Modelling Assembly Total Hours required for production: Batting Helmet 242 605 847 Football Helmet 3240 11664 14904 -Total 3482 12269 15751 Hourly rate 20 14 Total Direct Labor Cost 69640 171766 241406 5. Factory Overhead Cost Budget Indirect Factory Wages 86000 Depreciation of plant and equipment 12000 Power and light 4000 Insurance and property tax 2300 Total factory overhead cost 104300 6. Cost of Goods Sold Budget Working Working Finished goods inventory, Mar 1 19480 (40*25)+(240*77) 1 Work in process inventory, Mar 1 15300 2 Direct materials: 3 Direct materials inventory, Mar 1 860 (90*6)+(80*4) 4 Direct materials purchases 185792 5 Cost of direct materials available for use 186652 6=3+4 Direct materials inventory, Mar 31 -560 (50*6)+(65*4) 7 Cost of direct materials placed in production 186092 8=6+7 Direct labor 241406 9 Factory overhead 104300 10 Total manufacturing costs 531798 11=8+9+10 Total work in process during period 547098 12=2+12 Work in process inventory, Mar 31 -14800 13 Cost of goods manufactured 532298 14=12+13 Cost of finished goods available for sale 551778 15=1+14 Finished goods inventory, Mar 31 -18410 (50*25)+(220*78) 16 Cost of goods sold 533368 17=15+16 7. Selling and Administrative Budget Selling Expense: Sale Salaries Expense 184300 Advertising Expense 27200 Telephone Expense-Selling 5800 Travel Expense Selling 9000 Total Selling Expense 226300 Administration Expense: Office Salaries Expense 32400 Depreciation Expense-Office Equipment 3800 Telephone expense—administrative 1200 office supplies expense 1100 Miscellaneous administrative expense 1100 Total administrative expenses 39600 Total operating expenses 265900 8. Budgeted Income Statement Revenue from sales From Sales Budget 1088000 Cost of goods sold From COGS Budget -533368 Gross profit 554632 Operating expenses: Selling expenses Selling Budget 226300 Administrative expenses Selling Budget 39600 Total operating expenses Selling+Administrative -265900 Income from operations 166292-115000 288732 Other revenue and expense: Interest revenue 940 Interest expense -872 Income before income tax 288800 Income tax expense 30% -86640 Net Income 202160

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