Question

Budgeted Income Statement and Supporting Budgets

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:
   Plastic	90 lbs.
   Foam lining	80 lbs.
   Finished products:
   Batting helmet	40 units at $25 per unit
   Football helmet	240 units at $77 per unit

3. Desired inventories at March 31:

   Direct materials:
   Plastic	50 lbs.
   Foam lining	65 lbs.
   Finished products:
   Batting helmet	50 units at $25 per unit
   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
   Depreciation of plant and equipment	12,000
   Power and light	4,000
   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 income and expense for March:

   Interest revenue	$940
   Interest expense	872

10. Estimated tax rate: 30%

2. Prepare a production budget for March. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Gold Medal Athletic Co. Production Budget For the Month Ending March 31 Units Batting helmet 1,200 Football helmet 6,500 Expected units to be sold Desired inventory, March 31 50 220 Total units available 1,250 Estimated inventory, March 1 40 X 6,720 240 x 6,480 Total units to be produced 1,210

Answer 1

Gold Medal Athletic Co.
Production Budget
For the month ending March 31
	Units
	Batting Helmet	Football helmet
Expected units to be sold	1,200	6,500
Desired Inventory, March 31	50	220
Total units available	1,250	6,720
Estimated inventory, March 1	-40	-240
Total units to be produced	1,210	6,480

Cost of goods sold:

Gold Medal Athletic Co.
Cost of Goods Sold Budget
For the month ending March 31
Finished goods inventory, March 1 (40*25+240*77)			$         19,480
Work in progress inventory, March 1		$     15,300
Direct materials:
Direct materials inventory, March 1 (90*6+80*4)	$              860
Direct materials purchases	$    1,85,792
Cost of direct materials available for use	$    1,86,652
Direct materials inventory, March 31 (-50*6-65*4)	$     (560.00)
Cost of direct materials placed in production	$    1,86,092
Direct labor	$    2,41,406
Factory overhead	$    1,04,300
Total manufacturing costs		$ 5,31,798
Total work in progress during the period		$ 5,47,098
Work in progress inventory, March 31		$ (14,800)
Cost of goods manufactured			$      5,32,298
Cost of finished goods available for sale			$      5,51,778
Finished goods inventory, March 31			$       (18,410)
Cost of Goods Sold			$      5,33,368

Workings:

Direct labor
	Batting Helmet	Football helmet	Total
Molding department	$          4,840 (1210*0.2*20)	$            64,800 (6480*0.5*20)	$            69,640
Assembly department	$          8,470 (1210*0.5*14)	$        1,63,296 (6480*1.8*14)	$        1,71,766
Total	$        13,310	$        2,28,096	$        2,41,406

Ending inventory
	Batting Helmet	Football helmet	Total
Units	50	220
Rate	$                25	$                    78
Cost	$          1,250	$            17,160	$            18,410

Factory overheads
Indirect factor wages	$            86,000
Depreication of plant and equipment	$            12,000
Power and light	$              4,000
Insurance and property taxes	$              2,300
Total	$        1,04,300