Concept explainers
The budget director of Feathered Friends Inc., with the assistance of thee controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for December:
A. Estimated sales for December
Bird house....................... | 3,200 units at $50 per unit |
Bird feeder....................... | 3,000 units at $70 per unit |
B. Estimated inventories at December 1:
Direct materials | Finished products: | ||
Wood............ | 220 ft | Bird house........ | 320 units at $27 per unit |
Plastic............ | 240 ft | Bird house........ | 270 units at $40 per unit |
C. Desired inventories at December 31:
Direct materials | Finished products: | ||
Wood............ | 220 ft | Bird house........ | 290 units at $27 per unit |
Plastic............ | 200 ft | Bird house........ | 205 units at $41 per unit |
D. Direct materials used in production:
In manufacture of Bird House: | In manufacture of Bird Feeder: | ||
Wood............ | 0.80 ft. per unit of product | Wood........ | 1.20 ft. per unit of product |
Plastic............ | 0.50 lb. per unit of product | Plastic......... | 0.75 lb. per unit of product |
E. Anticipated cost of purchases and beginning and ending inventory of direct materials:
Wood…… | $7.00 per ft |
Plastic | $1.00 per lb. |
F. Direct labor requirements:
Bird House: | |
Fabrication Department...................... | 0.20 hr. at $16 per hr. |
Assembly Department........................ | 0.30 hr. at $12 per hr. |
Bird Feeder: | |
Fabrication Department...................... | 0.40 hr. at $16 per hr. |
Assembly Department........................ | 0.35 hr. at $12 pr hr. |
G. Estimated factory overhead costs for December:
Indirect factory wages | $75,000 |
23,000 | |
Power and light | $6,000 |
Insurance and property tax | 5,000 |
H. Estimated operating expenses for December:
Sales salaries expense | $70,000 |
Advertising expense | 18,000 |
Office salaries expense | 21,000 |
Depreciation expense—office equipment | 600 |
Telephone expense—selling | 550 |
Telephone expense—administrative | 250 |
Travel expense—selling | 4,000 |
Office supplies expense | 200 |
Miscellaneous administrative expense | 400 |
I. Estimated other income and expense for December:
Interest revenue $200
Interest expense 122
J. Estimated tax rate: 30%
Instructions
- 1. Prepare a sales budget for December.
- 2. Prepare a production budget for December.
- 3. Prepare a direct materials purchases budget for December.
- 4. Prepare a direct labor cost budget for December.
- 5. Prepare a
factory overhead cost budget for December. - 6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be $29,000, and work in process at the end of December is estimated to be $35,400.
- 7. Prepare a selling and administrative expenses budget for December.
- 8. Prepare a budgeted income statement for December.
1.
Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.
To Prepare: The sales budget for the month ending December 31.
Explanation of Solution
The following table shows the sales budget.
Company F Sales Budget For the Month Ending December 31 | |||
Product and Area | Unit Sales Volume | Unit Selling Price ($) | Total Sales ($) |
(A) | (B) | (A) × (B) | |
Birdhouse | 3,200 | 50 | 160,000 |
Bird feeder | 3,000 | 70 | 210,000 |
Total Revenue from Sales | 370,000 |
Table (1)
2.
To Prepare: The production budget for the month ending December 31.
Explanation of Solution
The following table shows the production budget.
Company F Production Budget For the Month Ending December 31 | ||
Details | Units | |
Birdhouse | Bird Feeder | |
Expected Units to be Sold | 3,200 | 3,000 |
Add: Desired Inventory, December 31 | 290 | 250 |
Total Units Required | 3,490 | 3,250 |
Less: Estimated Inventory, December 1 | (320) | (270) |
Total Units to be Produced | 3,170 | 2,980 |
Table (2)
3.
To Prepare: The direct materials purchase budget for the month ending December 31.
Answer to Problem 21.3APR
The following table shows the direct materials purchase budget.
Company F Direct Materials Purchase Budget For the Month Ending December 31 | ||
Details | Units | |
Wood | Plastic | |
Required units for production: | ||
Birdhouse | 2,536 (1) | 1,585 (2) |
Bird Feeder | 3,576 (3) | 3,576 (4) |
Add: Desired inventory, December 31 | 220 | 200 |
Total units required | 6,332 | 4,020 |
Less: Estimated inventory, December 1 | (200) | (240) |
Total units to be purchased (A) | 6,132 | 3,780 |
Unit price (B) | $7 | $1 |
Total (A) × (B) | $42,924 | $3,780 |
Total direct materials to be purchased | 46,704 |
Table (3)
Explanation of Solution
Working Notes:
Calculate the direct material (wood) for birdhouse.
Calculate the direct material (plastic) for birdhouse.
Calculate the direct material (wood) for bird feeder.
Calculate the direct material (plastic) for bird feeder.
4.
To Prepare: The direct labor cost budget of Company F.
Answer to Problem 21.3APR
The following table shows the direct labor cost budget for fabrication and assembly department.
Company F | ||
Direct Labor Cost Budget | ||
For the Month Ending December 31 | ||
Particulars | Fabrication Department |
Assembly Department |
Hours Required for Production: | ||
Birdhouse | 634 (5) | 951 (6) |
Bird feeder | 1,192 (7) | 1,043 (8) |
Total Hours Required (A) | 1,826 | 1,994 |
Hourly Rate (B) | $16 | $12 |
Total Cost (A) × (B) | $29,216 | $23,928 |
Total Direct Labor Cost | $53,144 |
Table (4)
Explanation of Solution
Working Notes:
Calculate the hours required for the production of birdhouse in fabrication department.
Calculate the hours required for the production of birdhouse in assembly department.
Calculate the hours required for the production of bird feeder in fabrication department.
Calculate the hours required for the production of bird feeder in assembly department.
5.
To Prepare: The factory overhead cost budget of Company F.
Explanation of Solution
The following table shows the factory overhead cost budget.
Company F | |
Factory Overhead Cost Budget | |
For the Month Ending December 31 | |
Particulars | Amount ($) |
Indirect factory wages | 75,000 |
Depreciation of plant and equipment | 23,000 |
Power and light | 6,000 |
Insurance and property tax | 5,000 |
Total | 109,000 |
Table (5)
6.
To Prepare: The cost of goods sold budget of Company F.
Answer to Problem 21.3APR
The following table shows the cost of goods sold budget.
F Company | |||
Cost of Goods Sold Budget | |||
For the month ending December 31 | |||
Particulars | Amount ($) | Amount ($) | Amount ($) |
Finished goods inventory, December 1 | 19,440 (9) | ||
Work-in-process inventory, December 1 | 29,000 | ||
Direct material: | |||
Direct materials inventory, December 1 | 1,640 (10) | ||
Direct materials purchases | 46,704 | ||
Cost of direct materials available for use | 48,344 | ||
Less: Direct materials inventory, December 31 | (1,740) (11) |
||
Cost of direct materials placed in production | 46,604 | ||
Direct labor | 53,144 | ||
Factory overhead | 109,000 | ||
Total manufacturing cost | 208,748 | ||
Total work-in-process during the period | 237,748 | ||
Less: Work-in-process inventory, December 30 | (35,400) | ||
Cost of goods manufactures | 202,348 | ||
Cost of finished goods available for sale | 221,788 | ||
Less: Finished goods inventory, December 30 | (18,080) (12) | ||
Cost of Goods Sold | 203,708 |
Table (6)
Explanation of Solution
Working Notes:
Calculate the beginning finished goods inventory.
Calculate the beginning direct material.
Calculate the ending direct material.
Calculate the ending finished goods inventory.
7.
To Prepare: The selling and administrative expenses budget of Company F.
Explanation of Solution
The following table shows the selling and administrative expenses budget.
Company F | ||
Selling and Administrative Budget | ||
For the Month Ending December 31 | ||
Particulars | Amount ($) | Amount ($) |
Selling expense: | ||
Sales salaries expense | 70,000 | |
Advertising expense | 18,000 | |
Telephone expense | 550 | |
Travel expense | 4,000 | |
Total selling expense | 92,550 | |
Administrative expense: | ||
Office salaries expense | 21,000 | |
Depreciation expense – office equipment | 600 | |
Telephone expense – Administrative | 250 | |
Office supplies expense | 200 | |
Miscellaneous administrative expense | 400 | |
Total administrative expenses | 22,450 | |
Total Operating Expenses | 115,000 |
Table (7)
8.
To Prepare: The budgeted income statement of Company F.
Explanation of Solution
Prepare the budgeted income statement of Company F.
Company F | ||
Budgeted Income Statement | ||
For the Month Ending December 31 | ||
Particulars | Amount ($) | Amount ($) |
Revenue from sales | 370,000 | |
Less: Cost of goods sold | (203,708) | |
Gross profit | 166,292 | |
Operating expenses: | ||
Selling expenses | 92,550 | |
Administrative expenses | 22,450 | |
Total operating expenses | (115,000) | |
Income from operations | 51,292 | |
Other revenue and expenses: | ||
Interest revenue | 200 | |
Interest expense | (122) | 78 |
Income before income tax | 51,370 | |
Income tax expense (30%) | (15,411) | |
Net Income | 35,959 |
Table (8)
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Chapter 21 Solutions
Financial & Managerial Accounting
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