Question

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:

1. Estimated sales for March:

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

2. 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

3. 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

4. Direct materials used in production:

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

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

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

6. Direct labor requirements:

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

7. Estimated factory overhead costs for March:

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

8. Estimated operating expenses for March:

Sales salaries expense	$184,300
Advertising expense	87,200
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

9. Estimated other revenue and expense for March:

Interest revenue	$940
Interest expense	872

10. Estimated tax rate: 30%

Instructions

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

Answer 1

Ans. 1	Gold Medal Athletic Co.
	Sales Budget
	For the Month Ending March 31
		Unit Sales Volume (a)	Unit Selling Price (b)	Total Sales (a*b)
	Batting helmet	1200	$40	$48,000
	Football helmet	6500	$160	$1,040,000
	Total revenue from sales			$1,088,000
Ans. 2	Gold Medal Athletic Co.
	Production Budget
	For the Month Ending March 31
	Particulars	Batting helmet	Football helmet
	Expected units to be sold	1200	6500
	Add: Desired ending finished inventory	50	220
	Total required units	1250	6720
	Less: Beginning finished inventory units	-40	-240
	Units to be produced	1210	6480
Ans. 3	Gold Medal Athletic Co.
	Direct Materials Purchases Budget
	For the Month Ending March 31
		Plastic	Foam lining	Total
	Required units for production:
	Batting helmet	1452	605
	Football helmet	22680	9720
	Add: Desired units of ending materials inventory	50	65
	Total units available	24182	10390
	Less: Estimated beginning materials inventory	-90	-80
	Total units to be purchased	24092	10310
	(*) Unit price	$6.00	$4.00
	Total direct materials to be purchased	$144,552	$41,240	$185,792
	*Calculations:
	Required units for production =   Units produced * Materials required per unit
		Plastic	Foam lining
	Required units for production:
	Batting helmet	1,210 * 1.20 lb	1,210 * 0.50 lb
	Football helmet	6,480 * 3.50 lb	6,480 * 1.50 lb
Ans. 4	Gold Medal Athletic Co.
	Direct Labor Cost Budget
	For the Month Ending March 31
		Molding Department	Assembly Department	Total
	Hours required for production:
	Batting helmet	242	605
	Football helmet	3240	11664
	Total	3482	12269
	(*) Hourly rate	$20.00	$14.00
	Total direct labor cost	$69,640	$171,766	$241,406
	*Calculations:
	Hours required for production = Units produced * Direct labor hours per unit
		Molding Department	Assembly Department
	Hours required for production:
	Batting helmet	1,210 * 0.20 hr.	1,210 * 0.50 hr.
	Football helmet	6,480 * 0.50 hr.	6,480 * 1.80 hr.