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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

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:

  1. a. Estimated sales for January:
Birdhouse  6.000 units at $55 per unit
Bird feeder  4,500 units at $75 per unit
  1. b.  Estimated inventories at January 1:
Direct materials:   Finished products:  
Wood 220 ft. Birdhouse 300 units at $23 per unit
Plastic 250 lb. Bird feeder 240 units at $34 per unit
  1. c.  Desired inventories at January 31:
Direct materials:   Finished products:  
Wood 180 ft. Birdhouse 340 units at $23 per unit
Plastic 210 lb. Bird feeder 200 units at $34 per unit
  1. d.  Direct materials used in production:
In manufacture of Birdhouse: In manufacture of Bird Feeder:
Wood ... 0.80 ft. per unit of product Wood  1.20 ft. per unitof product
Plastic . . 0.50 lb. per unit of product Plastic  0.75 lb. per unit of product
  1. e.  Anticipated cost of purchases and beginning and ending inventory of direct materials:
Wood $8.00 per ft. Plastic $1.20 per lb.
  1. f. f. Direct labor requirements:
Birdhouse:  
Fabrication Department 0.20 hr. at$15 per hr.
Assembly Department 0.30 hr. at $12 per hr.
Bird Feeder:  
Fabrication Department 0.40 hr. at$15 per hr.
Assembly Department 0.35 hr. at $12 per hr.
  1. g.  Estimated factory overhead costs for January:
Indirect factory wages $80,000 Power and light $8,000
Depreciation of plant and equipment 25,000 Insurance and property tax 2,000
  1. h. Estimated operating expenses for January:
Sales salaries expense $90,000
Advertising expense 20,000
Office salaries expense 18,000
Depredation expense—office equipment 800
Telephone expense—selling 500
Telephone expense—administrative 200
Travel expense—selling 5,000
Office supplies expense 250
Miscellaneous administrative expense 450
  1. i. Estimated other income and expense for January:
Interest revenue $300
Interest expense 224
  1. j.  Estimated tax rate: 30%

Instructions

  1. 1. Prepare a sales budget for January.
  2. 2. Prepare a production budget for January.

3. Prepare a direct materials purchases budget for January.

  1. 4. Prepare a direct labor cost budget for January.
  2. 5. Prepare a factory overhead cost budget for January.
  3. 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.
  4. 7. Prepare a selling and administrative expenses budget for January.
  5. 8. Prepare a budgeted income statement for January.

1.

To determine

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 January 31.

Explanation

The following table shows the sales budget.

Company B

Sales Budget

For the Month Ending January 31

Product and Area Unit Sales Volume Unit Selling Price ($)

2.

To determine

To Prepare: The production budget for the month ending January 31.

3.

To determine

To Prepare: The direct materials purchase budget for the month ending January 31.

4.

To determine

To Prepare: The direct labor cost budget of Company B.

5.

To determine

To Prepare: The factory overhead cost budget of Company B.

6.

To determine

To Prepare: The cost of goods sold budget of Company B.

7.

To determine

To Prepare: The selling and administrative expenses budget of Company B.

8.

To determine

To Prepare: The budgeted income statement of Company B.

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