Question

The JustOneMore Company produces and sells organic plain potato chips. The one-pound family size bag of chips has two direct materials – potatoes and packaging. JustOneMore is preparing budgets for the second quarter ending June 30, 2019. For each requirement below prepare budgets by month for April, May, and June, and a total budget for the quarter.

Statements 5-8 are the only ones needed!

The previous year’s sales (2018) for the corresponding period were:

April                      60,000 bags

May                       70,000 bags

June                       85,000 bags

July                        75,000 bags

August                  65,000 bags

5. JustOneMore budgets indirect materials (e.g., salt, oil) at $0.04 per bag. JustOneMore treats indirect labor and utilities as mixed costs. The variable components are $0.45 per bag for indirect labor and $0.15 per bag for utilities. The following fixed costs per month are budgeted for indirect labor, $20,000, utilities, $3,000, and other, $10,000. Prepare a Manufacturing Overhead budget.

6. Variable selling and administrative expenses are $1.05 per bag of chips sold. Fixed selling and administrative expenses are $40,000 per month. These costs are not itemized, i.e., the budget has only two line items – variable operating expenses and fixed operating expenses.   Prepare an Operating Expenses budget.

7. Prepare a Budgeted Manufacturing Cost per unit budget. Refer to exhibit 9-11 for guidance. To calculate FMOH/unit calculate total FMOH for the year and divide this by budgeted production for the year. The total production volume for the year is budgeted at 850,000 bags.

8. Prepare a Budgeted Income Statement for the quarter for JustOneMore. Assume interest expense of $0, and income tax expense of 21% of income before taxes.

Answer 1

Prepare Operating Expenses budget as shown below: Operating Expenses Budget Apr 60,000 May 70,000 June Total Number of bags to be sold Variable selling and administrative expenses ($1.05 per bag) Variable Operating expenses Fixed Selling and administrative expenses per month (d) Total Operating Expenses (e ctd) 85,000 215,000 (a) $1.05 $63,000 S73,500 $40,000 $40,000 (b) (c axb) $1.05 S1.05 89.250 $225,750 $40.000 $103,000 S113,500 $129,250 S345,750 Note: 1. Production units are not available in the given information; hence, Manufacturing Overhead budget is not possible to prepare. 2. Due to missing information, i.e., production units are not available hence, Budgeted Manufacturing cost per unit budget and Budgeted income statements are not possible to prepare.