Question

A Print Question 4 Not yet answered Marked out of 2.00 Flag question Juoddns Preparation of Individual Budgets During the first calendar quarter of 2016, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 5,000 units in the urban region at a unit price of $53 and 4,000 units in the rural region at $48 each. Because the sales manager expects the product to catch on, he has asked for production sufficient to generate a 3,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses: Variable Fixed (per unit) (total) Manufacturing costs: Direct materials A (4 lb. @ $3.15/lb.) $12.60 B 2 lb. @ $4.65/lb.) 9.30 Direct labor (0.5 hours per unit) Manufacturing overhead: Depreciation $7,650 Factory supplies 90 4.500 Supervisory salaries - 28,800 Other .75 22,950 Operating expenses: Selling: Advertising - 22,500 Sales salaries & commissions* .50 15,000 Other* 90 3,000 Administrative: Office salaries 2,700 Supplies 1,050 Other 0.08 1.950 *Varies per unit sold, not per unit produced. 7.50 0.15 a. Assuming that the desired ending inventories of materials A and B are 3,000 and 5,000 pounds, respectively, and that work-in-process inventories are immaterial, prepare budgets for the calendar quarter in which the new product will be introduced for each of the following operating factors: Do not use negative signs with any of your answers below. 1. Total sales 2. Production units

Answer 1

1) Total Sales $ 457,000 Urban Region Rural Region 5,000 4,000 $ 53 $ 48 $ 265,000 $ 192,000 Total 9,000 Number of Units (A) Unit Selling Price (B) Total Sales (A*B) $457,000 2)Production 12,000 Units Urban Region 5,000 Rural Region 4,000 Budgeted sales in units Add: Desired Ending inventory Production Total 9,000 3,000 12,000

3) Material purchase cost Material A Material B 48,000 24,000 3,000 5,000 51,000 29,000 Total 72,000 8,000 80,000 Total pounds required for production Add: Desired ending materials inventory (A) Total pounds to be available Less: Beginning material inventory Total material to be purchased in pounds Cost of material per lb. (B) Total material purchases ($) Ending Material at cost (A*B) 80,000 51,000 3.15 $ 160,650 $ 9,450 29,000 4.65 134,850 23,250 $ $ $295,500 $ 32,700 4) Direct labour cost $ 90,000 Production units (A) Direct labour cost per unit (B) Direct labour cost (A*B) 12,000 $ 7.50 $ 90,000

5) Manufacturing Overhead cost Depreciation Factory supplies Supervisory salaries Other Total manufacturing overhead Fixed Variable Total $ 7,650 $ 7,650 $ 4,500 $ 10,800 $ 15,300 $ 28,800 $ 28,800 $ 22,950 $ 9,000$ 31,950 $ 63,900 $ 19,800 $ 83,700 6) Selling & Administrative expenses 1 Fixed Variable Total $ 22,500 $ 15,000 $ 3,000 $ 40,500 $ $ $ - 13,500 8,100 21,600 $ 22,500 $ 28,500 $ 11,100 $ 62,100 Selling expenses: Advertising Sales salaries & Commission Other Total Selling expenses Administrative expenses: Office salaries Supplies Other Total Administrative expenses Total Selling & Administrative expenses $ 2,700 $ 1,050 $ 1,950 $ 5,700 $ 46,200 $ $ $ $ - $ 2,700 1,800 $ 2,850 960 $ 2,910 2,760 $ 8,460 24,360$ 70,560

$457,000 Budgeted Income Statement Sales Cost of Goods sold: Beginning inventory Finished Goods Material: Beginning inventory Material Add:Material Purchases Material available Less: Ending Inventory Material Direct Material Direct Labor Manufacturing overhead Total manufacturing cost Cost of Goods available for sale Less: Ending Inventory Finished Goods* Cost of Goods sold $ 295,500 $ 295,500 $ 32,700 $ 262,800 $ 90,000 $ 83,700 $ $ $ 436,500 436,500 109,125 $327,375 Gross Profit $129,625

$ $ 62,100 8,460 Operating expenses: Selling expenses Administrative expenses Total Operating expenses Income before Income Tax Income Tax expense (@30%) Net Income $ 70,560 $ 59,065 $ 17,720 $ 41,346 $ Total manufacturing cost Units produced Per unit cost Ending inventory-Finished Goods Ending Inventory Cost C=A/B 436,500 12,000 36.375 3,000 Units 109,125 C D $