Question

Dashboard Saved Exercise 13-40 (Static) Prepare Budgeted Financial Statements (LO 13-6) Cycle-1 is a fast-growing start-up firm that manufactures bicycles. The following income statement is available for October $180,000 Sales revenue (300 units @ $600 per unit) Less Manufacturing costs Variable costs Depreciation (fixed) Marketing and administrative costs Fixed costs (cash) Depreciation (fixed) Total costs Operating profits 26,000 27,540 67,500 22,860 $143.900 $ 36,100 Sales volume is expected to increase by 20 percent in November, but the sales price is expected to fall 10 percent. Variable manufacturing costs are expected to increase by 4 percent per unit in November. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 8 percent Cycle-1 operates on a cash basis and maintains no inventories. Depreciation is fixed and should remain unchanged over the next three years. Required: Prepare a budgeted income statement for November. (Do not round Intermediate calculations.)

Answer 1

$194,000 CYCLE-1 Budgeted Income Statement For the month of November Sales revenue Less: Manufacturing costs Variable cost Depreciation cost Total manfacturing costs $32,448 $27,540 $59,988 Less: Marketing and adminstrative cost Fixed cost Depreciation Total Marketing and adminstrative cost Total cost Operating profit $72,900 $22,860 $95,760 $155,748 $38,252

Working Notes: 1) Sales volume = 300 units ~ 1.20 = 360 units Sale price per unit = $600 per unit 0.90 = $540 per unit Sales revenue = $540 x 360 = $194,000 26,000 2) Old Variable costs per unit $86.66666667 per unit New variable costs = ($86.66666667 * 1.04) ~ 360 units New variable costs = $32,448 3) Marketing & admn. Costs = $67,500 x 1.08 = $72,900 300