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: Batting helmet .............................. 1,200 units at $40 per unit Football helmet ............................. 6,500 units at $160 per unit Estimated inventories on March 1: Direct materials: Plastic ............. 90 lbs. Foam lining....... 80 lbs. Finished products: Batting helmet ........ 40 units at $25 per unit Football helmet ...... 240 units at $77 per unit. Desired inventories on March 31: Direct materials: Plastic ............. 50 lbs. Foam lining........ 65 lbs. Finished products: Batting helmet ........ 50 units at $25 per unit Football helmet ....... 220 units at $78 per unit Direct materials used in production: In manufacture of batting helmet: Plastic ................................... 1.2 lbs. per unit of product Foam lining.............................. 0.5 lb. per unit of product In manufacture of football helmet: Plastic ................................... 3.5 lbs. per unit of product Foam lining.............................. 1.5 lbs. per unit of product Anticipated cost of purchases and beginning and ending inventory of direct materials: Plastic ...................................... $6 per lb. Foam lining ................................. $4 per lb. Direct labor requirements: Batting helmet: Molding Department ..................... 0.2 hr. at $20 per hr. Assembly Department .................... 0.5 hr. at $14 per hr. Football helmet: Molding Department ..................... 0.5 hr. at $20 per hr. Assembly Department .................... 1.8 hrs. at $14 per hr. Estimated factory overhead costs for March: Indirect factory wages – $86,000 - Power and light – $4,000 Depreciation of plant and equipment – $12,000 – Insurance and property tax – 2,300 Estimated operating expenses for March: Sales salaries expense……$184,300 Advertising expense……… 87,200 Office salaries expense……32,400 Depreciation expense—office equipment…….3,800 Telephone expense—selling………5,800 Telephone expense—administrative…….1,200 Travel expense—selling…… 9,000 Office supplies expense…….1,100 Miscellaneous administrative expense……...1,000 Estimated other revenue and expense for March: Interest revenue $940 Interest expense $872 Estimated tax rate: 30% Instructions Prepare a selling and administrative expenses budget for March. Prepare a budgeted income statement for March.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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:
Batting helmet .............................. 1,200 units at $40 per unit
Football helmet ............................. 6,500 units at $160 per unit
- Estimated inventories on March 1:
Direct materials:
Plastic ............. 90 lbs.
Foam lining....... 80 lbs.
Finished products:
Batting helmet ........ 40 units at $25 per unit
Football helmet ...... 240 units at $77 per unit.
- Desired inventories on March 31:
Direct materials:
Plastic ............. 50 lbs.
Foam lining........ 65 lbs.
Finished products:
Batting helmet ........ 50 units at $25 per unit
Football helmet ....... 220 units at $78 per unit
- Direct materials used in production:
In manufacture of batting helmet:
Plastic ................................... 1.2 lbs. per unit of product
Foam lining.............................. 0.5 lb. per unit of product
In manufacture of football helmet:
Plastic ................................... 3.5 lbs. per unit of product
Foam lining.............................. 1.5 lbs. per unit of product
- Anticipated cost of purchases and beginning and ending inventory of direct materials:
Plastic ...................................... $6 per lb.
Foam lining ................................. $4 per lb.
- Direct labor requirements:
Batting helmet:
Molding Department ..................... 0.2 hr. at $20 per hr.
Assembly Department .................... 0.5 hr. at $14 per hr.
Football helmet:
Molding Department ..................... 0.5 hr. at $20 per hr.
Assembly Department .................... 1.8 hrs. at $14 per hr.
- Estimated
factory overhead costs for March:
Indirect factory wages – $86,000 - Power and light – $4,000
- Estimated operating expenses for March:
Sales salaries expense……$184,300
Advertising expense……… 87,200
Office salaries expense……32,400
Depreciation expense—office equipment…….3,800
Telephone expense—selling………5,800
Telephone expense—administrative…….1,200
Travel expense—selling…… 9,000
Office supplies expense…….1,100
Miscellaneous administrative expense……...1,000
- Estimated other revenue and expense for March:
Interest revenue $940
Interest expense $872
- Estimated tax rate: 30%
Instructions
- Prepare a selling and administrative expenses budget for March.
- Prepare a budgeted income statement for March.
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