Question

1. Budgeted Income Statement and Supporting An accounting device used to plan and control resources of operational departments and divisions.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%

   Required:

   1. Prepare a One of the major elements of the income statement budget that indicates the quantity of estimated sales and the expected unit selling price.sales budget for January.

   Birding Homes & Feeders Inc. Sales Budget For the Month Ending January 31
   	Unit Sales Volume	Unit Selling Price	Total Sales
   Bird house	15000	$25.00	$375000
   Bird feeder	40000	15.00	600000
   Total revenue from sales			$975000

   2. Prepare a A budget of estimated unit production.production budget for January. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

   Birding Homes & Feeders Inc. Production Budget For the Month Ending January 31
   	Units
   		Bird House		Bird Feeder
   Expected units to be sold		15000		40000
   Desired inventory, January 31		1500		3000
   Total units available		16500		43000
   Estimated inventory, January 1		-1000		-2500
   Total units to be produced		15500		40500

   3. Prepare a A budget that uses the production budget as a starting point to budget materials purchases.direct materials purchases budget for January. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

   Birding Homes & Feeders Inc. Direct Materials Purchases Budget For the Month Ending January 31
   	Wood	Plastic	Total
   Required units for production:
   Bird house	12400	1550
   Bird feeder	8100	40500
   Desired units of inventory, January 31	500	1250
   Total units available	21000	43300
   Estimated units of inventory, January 1	-600	-1000
   Total units to be purchased	20400	42300
   Unit price	×2.5	×$0.8
   Total direct materials to be purchased	$51000	$33840	$

   4. Prepare a Budget that estimates direct labor hours and related costs needed to support budgeted production.direct labor cost budget for January.

   Birding Homes & Feeders Inc. Direct Labor Cost Budget For the Month Ending January 31
   			Fabrication Department		Assembly Department	Total
   Hours required for production:
   	Bird house		6200		3100
   	Bird feeder		10125		4050
   	Total		16325		7150
   Hourly rate			×$18		×$12
   Total direct labor cost			$293850		$85800	$379650

   5. Prepare a Budget that estimates the cost for each item of factory overhead needed to support budgeted production.factory overhead cost budget for January.

   Birding Homes & Feeders Inc. Factory Overhead Cost Budget For the Month Ending January 31
   Indirect factory wages	$
   Depreciation of plant and equipment
   Power and light
   Insurance and property tax
   Total factory overhead cost	$

   6. Prepare a A budget of the estimated direct materials, direct labor, and factory overhead consumed by sold products.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
   Finished goods inventory, January 1			$
   Work in process inventory, January 1		$
   Direct materials:
   Direct materials inventory, January 1	$
   Direct materials purchases
   Cost of direct materials available for use	$
   Direct materials inventory, January 31
   Cost of direct materials placed in production	$
   Direct labor
   Factory overhead
   Total manufacturing costs
   Total work in process during period		$
   Work in process inventory, January 31
   Cost of goods manufactured
   Cost of finished goods available for sale			$
   Finished goods inventory, January 31
   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:
   Sales salaries expense		$
   Advertising expense
   Travel expense—selling
   Total selling expenses			$
   Administrative expenses:
   Office salaries expense		$
   Depreciation expense—office equipment
   Office supplies expense
   Miscellaneous administrative expense
   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
   Revenue from sales			$
   Cost of goods sold
   Gross profit			$
   Operating expenses:
   Selling expenses		$
   Administrative expenses
   Total operating expenses
   Operating income			$
   Other revenue and expense:
   Interest revenue		$
   Interest expense
   Income before income tax			$
   Income tax expense
   Net income			$

Answer 1

Birding Homes & Feeders Inc. Sales Budget For the Month Ending January 31 Unit Selling Unit Sales Total Sales Volume Price Bird house 375000 25 15 15000 Bird feeder Total revenue from sales 40000 600000 975000 Birding Homes & Feeders Inc. Production Budget For the Month Ending January 31 Units Bird House Bird Feeder Expected units to be sold Plus desired inventory, January 31 15000 40000 1500 3000 16500 43000 Total Less estimated inventory, January 1 Total units to be produced -2500 40500 -1000 15500 Birding Homes & Feeders Inc. Direct Materials Purchases Budget For the Month Ending January 31 Wood Plastic Total Required units for production: 1550 12400 8100 Bird house Bird feeder 40500 Plus desired units of inventory, January 31 Total 500 1250 43300 - 1000 21000 Less estimated units of inventory, January 1 Total units to be purchased Unit price Total direct materials to be purchased -600 20400 42300 2.5 51000 0.8 33840 84840 Birding Homes & Feeders Inc. Direct Labor Cost Budget For the Month Ending January 31 Fabrication Department Assembly Department Total Hours required for production: Bird house 6200 10125 16325 3100 Bird feeder Total Hourly rate Total direct labor cost 4050 7150 12 18 293850 379650 85800 Birding Homes & Feeders Inc. Factory Overhead Cost Budget For the Month Ending January 31 Indirect factory wages Depreciation of plant and equipment Power and light 40000 20000 10000 Insurance and property tax 5000 75000 Total

Birding Homes & Feeders Inc. Cost of Goods Sold Budget Supporting calculations: Units Cost Total For the Month Ending January 31 Finished goods inventory, Jan. 1: 15 15,000 8 20,000 35,000 1,000 2,500 Bird house Finished goods inventory, Jan. 1 Work in process, Jan. 1 Direct materials: Direct materials inventory, Jan. 1 Direct materials purchases Cost of direct materials available for use Direct materials inventory, Jan. 31 Cost of direct materials placed in production Direct labor Factory overhead Total manufacturing costs Total work in process during the period Work in process, Jan. 31 Cost of goods manufactured Bird feeder 35000 Total 9000 Finished goods inventory, Jan. 31 : 15 22,500 8 24,000 46,500 1,500 Bird house 2300 3,000 Bird feeder 84840 Total 87140 Direct materials inventory, Jan 1 -2250 600 2.50 1,000 0.80 1,500 Wood 84890 800 379650 Plastic 2,300 Total 75000 539540 Direct materials inventory, Jan 31 500 2.50 548540 1,250 1,000 2,250 Wood 0.80 1,250 Plastic -10500 538040 Total 573040 Cost of finished goods available for sale Finished goods inventory, Jan. 31 Cost of goods sold -46500 526540

Birding Homes & Feeders Inc. Selling and Administrative Expenses Budget For the Month Ending January 31 Selling expenses: Salessalaries expense Advertising expense Telephone expense- selling Total selling expenses Administrative expenses: Office salaries expense Depreciation expense-office equipment Office supplies expense Miscellaneous administrative expense Total administrative expenses Total operatingexpenses 125000 80000 25000 230000 40000 4000 2500 3500 50000 280000 Birding Homes & Feeders Inc. Budgeted Income Statement For the Month Ending January 31 Revenue from sales Cost of goods sold Gross profit Operating expenses: Selling expenses Administrative expenses Total operatingexpenses Income from operations Other income: 975000 |-526540 448460 -230000 -50000 -280000 168460 Interest revenue 4540 Other expenses: Interest expen se Income before income tax Income tax expense at 25% -3000 1540 170000 -42500 Net income 127500