Financial and Managerial Accounting - With CengageNow
Financial and Managerial Accounting - With CengageNow
14th Edition
ISBN: 9781337577809
Author: WARREN
Publisher: CENGAGE L
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Chapter 21, Problem 21.3BPR

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:

A. Estimated sales for March:

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

B. Estimated inventories at March 1:

Direct materials:   Finished products:  
Plastic............ 90 lbs. Batting helmet....... 40 units at $25 per unit
Foam lining....... 80 lbs. Football helmet...... 240 units at $77 per unit

C. Desired inventories at March 31:

Direct materials:   Finished products:  
Plastic............ 50 lbs. Batting helmet....... 50 units at $25 per unit
Foam lining....... 65 lbs. Football helmet...... 220 units at $78 per unit

D. Direct materials used in production:

In manufacture of batting helmet:
Plastic............................... 1.2lbs. per unit of product
Foam lining......................... 0.5 lb. per unit of product
In manufacture of football helmet:
Plastic............................... 3.5lbs. per unit of product
Foam lining.......................... 1.5 lbs. per unit of product

E. Anticipated cost of purchases and beginning and ending inventory of direct materials:

Plastic........................ $6 per lb.
Foam lining................... $4 per lb.

F. Direct labor requirements

Batting helmet:  
Molding Department.............  0.2 hr. at $20 per unit
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.

G. Estimated factory overhead costs for March:

Indirect factory wages $86,000
Depreciation of plant and equipment 12,000
Power and light $4,000
Insurance and property tax 2,300

H. Estimated operating expenses for March:

Sales salaries expense $184,300
Advertising expense 87,300
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

I. Estimated other income and expense for March:

Interest revenue $940
Interest expense 872

J. Estimated tax rate:    30%

Instructions

  1. 1. Prepare a sales budget for March.
  2. 2. Prepare a production budget for March.
  3. 3. Prepare a direct materials purchases budget for March.
  4. 4. Prepare a direct labor cost budget for March.
  5. 5. Prepare a factory’ overhead cost budget for March.
  6. 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.
  7. 7. Prepare a selling and administrative expenses budget for March.
  8. 8. Prepare a budgeted income statement for March.

1.

Expert Solution
Check Mark
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 March 31.

Explanation of Solution

The following table shows the sales budget.

Company G

Sales Budget

For the Month Ending March 31

Product and Area Unit Sales Volume Unit Selling Price ($) Total Sales ($)
(A) (B) (A) × (B)
Birdhouse 1,200 40 48,000
Bird feeder 6,500 160 1,040,000
Total Revenue from Sales 1,088,000

Table (1)

2.

Expert Solution
Check Mark
To determine

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

Explanation of Solution

The following table shows the production budget.

Company G

Production Budget

For the Month Ending March 31

Details Units
Batting Helmet Football Helmet
Expected Units to be Sold 1,200 6,500
Add: Desired Inventory, March 31 50 220
Total Units Required 1,250 6,720
Less: Estimated Inventory, March 1 (40) (240)
Total Units to be Produced 1,210 6,480

Table (2)

3.

Expert Solution
Check Mark
To determine

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

Answer to Problem 21.3BPR

The following table shows the direct materials purchase budget.

Company G

Direct Materials Purchase Budget

For the Month Ending March 31

Details Units
Plastic Foam Lining
Required units for production:    
Batting Helmet 1,452 (1) 605 (2)
Football Helmet 22,680 (3) 9,720 (4)
Add: Desired inventory, March 31 50 65
Total units required 24,182 10,390
Less: Estimated inventory, March 1 (90) (80)
Total units to be purchased (A) 24,092 10,310
Unit price (B) $6 $4
Total (A) × (B) $144,552 $41,240
Total direct materials to be purchased 185,792

Table (3)

Explanation of Solution

Working Notes:

Calculate the direct material (plastic) for batting helmet.

Direct material (plastic) cost for batting helmet=1,210×1.20lb.=1,452lb. (1)

Calculate the direct material (foam lining) for batting helmet.

Direct material (foam lining) cost for batting helmet=1,210×0.50lb.=605lb. (2)

Calculate the direct material (plastic) for football helmet.

Direct material (plastic) cost for football helmet=6,480×3.50lb.=22,680lb. (3)

Calculate the direct material (foam lining) for football helmet.

Direct material (foam lining) cost for football helmet=6,480×1.50lb.=9,720lb. (4)

4.

Expert Solution
Check Mark
To determine

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

Answer to Problem 21.3BPR

The following table shows the direct labor cost budget for molding and assembly department.

Company B
Direct Labor Cost Budget
For the Month Ending March 31
Particulars

Molding

Department

Assembly

Department

Hours Required for Production:    
     Batting helmet 242 (5) 605 (6)
     Football helmet 3,240 (7) 11,664 (8)
Total Hours Required (A) 3,482 12,269
Hourly Rate (B) $20 $14
Total Cost (A) × (B) $69,640 $171,766
Total Direct Labor Cost 241,406

Table (4)

Explanation of Solution

Working Notes:

Calculate the hours required for the production of batting helmet in molding department.

Hours required for production=1,210×0.20hr=242hrs (5)

Calculate the hours required for the production of batting helmet in assembly department.

Hours required for production=1,210×0.50hr=605hrs (6)

Calculate the hours required for the production of football helmet in molding department.

Hours required for production=6,480×0.50hr=3,240hrs (7)

Calculate the hours required for the production of football helmet in assembly department.

Hours required for production=6,480×1.80hr=11,664hrs (8)

5.

Expert Solution
Check Mark
To determine

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

Explanation of Solution

The following table shows the factory overhead cost budget.

Company G
Factory Overhead Cost Budget
For the Month Ending March 31
Particulars Amount ($)
Indirect factory wages 86,000
Depreciation of plant and equipment 12,000
Power and light 4,000
Insurance and property tax 2,300
Total 104,300

Table (5)

6.

Expert Solution
Check Mark
To determine

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

Answer to Problem 21.3BPR

The following table shows the cost of goods sold budget.

G Company
Cost of Goods Sold Budget
For the month ending March 31
Particulars Amount ($) Amount ($) Amount ($)
Finished goods inventory, March 1     19,480 (9)
Work-in-process inventory, March 1   15,300  
Direct material:      
  Direct materials inventory, March 1 860 (10)    
  Direct materials purchases 185,792    
Cost of direct materials available for use 186,652    
Less: Direct materials inventory, March 31

(560)

(11)

   
Cost of direct materials placed in production 186,092    
Direct labor 241,406    
Factory overhead 104,300    
Total manufacturing cost 531,798  
Total work-in-process during the period 547,098  
Less: Work-in-process inventory, March 31   (14,800)  
Cost of goods manufactures 532,298
Cost of finished goods available for sale 551,778
Less: Finished goods inventory, March 31    

       (18,410)

(12)

Cost of Goods Sold 533,368

Table (6)

Explanation of Solution

Working Notes:

Calculate the beginning finished goods inventory.

Beginning finished goods inventory=(40×$25)+(240×$77)=$1,000+$18,480=$19,480 (9)

Calculate the beginning direct material.

Beginningdirect mateial purchased=(90×$6)+(80×$4)=$540+$320=$860 (10)

Calculate the ending direct material.

Endingdirect mateial purchased=(50×$6)+(65×$4)=$300+$260=$560 (11)

Calculate the ending finished goods inventory.

Ending finished goods inventory=(50×$25)+(220×$78)=$1,250+$17,160=$18,410 (12)

7.

Expert Solution
Check Mark
To determine

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

Explanation of Solution

The following table shows the selling and administrative expenses budget.

Company G
Selling and Administrative Budget
For the Month Ending March 31
Particulars Amount ($) Amount ($)
Selling expense:    
  Sales salaries expense 184,300  
  Advertising expense 87,200  
  Telephone expense 5,800  
  Travel expense 9,000  
Total selling expense   286,300
Administrative expense:    
  Office salaries expense 32,400  
  Depreciation expense – office equipment 3,800  
  Telephone expense – Administrative 1,200  
  Office supplies expense 1,100  
  Miscellaneous administrative expense 1,000  
Total administrative expenses   39,500
Total Operating Expenses 325,800

Table (7)

8.

Expert Solution
Check Mark
To determine

To Prepare: The budgeted income statement of Company G.

Explanation of Solution

Prepare the budgeted income statement of Company G.

Company G
Budgeted Income Statement
For the Month Ending March 31
Particulars Amount ($) Amount ($)
Revenue from sales   1,088,000
Less: Cost of goods sold   (533,368)
Gross profit   554,632
Operating expenses:    
 Selling expenses 286,300  
 Administrative expenses 39,500  
Total operating expenses   (325,800)
Income from operations   228,832
Other revenue and expenses:    
  Interest revenue 940  
  Interest expense (872) 68
Income before income tax   228,900
Income tax expense (30%)   (68,670)
Net Income 160,230

Table (8)

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Chapter 21 Solutions

Financial and Managerial Accounting - With CengageNow

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