Question

Budgeted Income Statement and Supporting Budgets

The budget director of Birding Homes & Feeders 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. Estimated sales for January:

   Bird house	15,000 units at $25 per unit
   Bird feeder	40,000 units at $15 per unit

2. Estimated inventories at January 1:

   Direct materials:
   Wood	600 ft.
   Plastic	1,000 lbs.
   Finished products:
   Bird house	1,000 units at $15 per unit
   Bird feeder	2,500 units at $8 per unit

3. Desired inventories at January 31:

   Direct materials:
   Wood	500 ft.
   Plastic	1,250 lbs.
   Finished products:
   Bird house	1,500 units at $15 per unit
   Bird feeder	3,000 units at $8 per unit

4. Direct materials used in production:

   In manufacture of Bird House:
   Wood	0.80 ft. per unit of product
   Plastic	0.10 lb. per unit of product
   In manufacture of Bird Feeder:
   Wood	0.20 ft. per unit of product
   Plastic	1.00 lb. per unit of product

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

   Wood	$2.50 per ft.
   Plastic	$0.80 per lb.

6. Direct labor requirements:

   Bird House:
   Fabrication Department	0.40 hr. at $18 per hr.
   Assembly Department	0.20 hr. at $12 per hr.
   Bird Feeder:
   Fabrication Department	0.25 hr. at $18 per hr.
   Assembly Department	0.10 hr. at $12 per hr.

7. Estimated factory overhead costs for January:

   Indirect factory wages	$40,000
   Depreciation of plant and equipment	20,000
   Power and light	10,000
   Insurance and property tax	5,000

8. Estimated operating expenses for January:

   Sales salaries expense	$125,000
   Advertising expense	80,000
   Office salaries expense	40,000
   Depreciation expense—office equipment	4,000
   Travel expense—selling	25,000
   Office supplies expense	2,500
   Miscellaneous administrative expense	3,500

9. Estimated other revenue and expense for January:

   Interest revenue	$4,540
   Interest expense	3,000

10. Estimated tax rate: 25%

5. Prepare a factory overhead cost budget for January.

Birding Homes & Feeders Inc. Factory Overhead Cost Budget For the Month Ending January 31
	$
Total factory overhead cost	$

6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $9,000, and work in process at the end of January is estimated to be $10,500. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Birding Homes & Feeders Inc. Cost of Goods Sold Budget For the Month Ending January 31
			$
		$
Direct materials:
	$
Cost of direct materials available for use	$
Cost of direct materials placed in production	$
Total manufacturing costs
Total work in process during period		$
Cost of goods manufactured
Cost of finished goods available for sale			$
Cost of goods sold			$

7. Prepare a selling and administrative expenses budget for January.

Birding Homes & Feeders Inc. Selling and Administrative Expenses Budget For the Month Ending January 31
Selling expenses:
		$
Total selling expenses			$
Administrative expenses:
		$
Total administrative expenses
Total operating expenses			$

8. Prepare a budgeted income statement for January. In the Other revenue and expense section, indicate expenses as negative amounts.

Birding Homes & Feeders Inc. Budgeted Income Statement For the Month Ending January 31
			$
			$
Operating expenses:
		$
Total operating expenses
Operating income			$
Other revenue and expense:
		$
Income before income tax			$
Net income			$

Answer 1

Answer with full working note is given below

Sales Budget Bird Total Bird house 15,000 Feeder 40,000 Sales Budget units Selling price Budgeted Sales (value) $375,000 $600,000 $975,000 Production budget Sales Add: Closing inventory Bird house 15,000 1,500 16,500 1,000 15,500 Bird Feeder 40,000 3,000 43,000 2,500 40,500 Less: Opening inventory Production (Units) Material needed for production Wood -ft Plastic - lb Total material needed Quantity Wood -ft Plastic - lb 0.80 0.10 0.20 1.00 12,400 1,550 8,100 40,500 20,500 42,050 Direct Material purchase budget Material needed for production Add:Closing stock Wood 20,500 5001 21,000 600 20,400 Plastic 42,050 1,250 43,300 1,000 42,300 Less: Opening stock Purchase Budget (units) Cost of Purchase per unit Purchase Budget $2.50 $51,000 $0.80 $33,840 Direct labor Budget Bird house Bird Feeder Hours needed for each unit Fabrication Department Assembly Department 0.40 Labor hour rate Fabrication Department Assembly Department Total labor hours Fabrication Department Assembly Department 6,200 3,100 10,125 4,050 Direct Labor cost Fabrication Department Assembly Department Total Direct Labor cost $111,600 $37,200 $148,800 $182,250 $48,600 $230,850 Birding Homes & Feeders Inc. Factory overhead cost budget For the month ending January 31st Indirect factory wages Depreciation of plant and equipment Power and light Insurance and property tax Total factory overhead cost budget $40,000 $20,000 $10,000 $5,000 $75,000 Birding Homes & Feeders Inc. Cost of Goods Sold Budget For the Month ending January 31st Direct Material Opening stock $2,300 Purchase of Material $84,840 Cost of Direct material available for use $87,140 Less: Closing stock $2,250 Cost of Direct material placed in production Direct Labor PRIME COST Factory overheads Total Manufacturing cost Add: Opening stock of WIP $84,890 $379,650 $464,540 $75,000 $539,540 $9,000 $548,540 $10,500 $538,040 $35,000 $573,040 $46,500 Less: Closing stock of WIP Cost of Goods manufactured Add: Opening stock of Finished Goods Cost of finished goods available for sale Less: Closing stock of Finished Goods Cost of Goods sold $526,540 Stock of Raw Material Units Opening Closing 600 500 1,000 1,250 wood plastic Total value of stock Rate 2.50 0.80 Value Opening Closing $1,500 $1,250 $800 $1,000 $2,300 $2,250 Stock of Finished Goods Units Opening Closing 1,000 1,500 2,500 3,000 Bird House Bird Feeder 15.00 8.00 Value Opening Closing $15,000 $22,500 $20,000 $24,000 $35,000 $46,500 Birding Homes & Feeders Inc. Selling and administrative Expenses Budget For the Month ending January 31st Selling expense Sales salaries expense Advertising expense Travel expenses Total Selling expense $125,000 $80,000 $25,000 $230,000 Administrative expenses Deprecation expenses Office salaries Office supplies miscellaneous administrative expense Total administrative expense $4,000 $40,000 $2,500 $3,500 $50,000 Total Operating expenses $280,000 Birding Homes & Feeders Inc. Budgeted Income Statement For the Month ending January 31st Sales Less: Cost of Goods Sold Gross profit Operating expenses Selling and administrative expense Operating Income Other revenue and income Interest income $975,000 $526,540 $448,460 $280,000 $168,460 Less: Interest expense Income before income tax Tax at 25% Net Income $4,540 $173,000 $3,000 $170,000 $42,500 $127,500