Question

Preparation of Individual Budgets During the first calendar quarter of 2016, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 10,000 units in the urban region at a unit price of $53 and 9,000 units in the rural region at $48 each. Because the sales manager expects the product to catch on, he has asked for production sufficient to generate a 8,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses: Variable Fixed (per unit) (total) Manufacturing costs: Direct materials A (4 lb. @ $3.15/lb.) $12.60 B (2 lb. @ $4.65/lb.) 9.30 Direct labor (0.5 hours per unit) 7.50 Manufacturing overhead: Depreciation $7,650 Factory supplies 4,500 0.90 28,800 Supervisory salaries Other 0.75 22,950 Operating expenses: Selling: Advertising 22,500 Sales salaries& commissions* 1.50 15,000 Other* 0.90 3,000 Administrative: Office salaries 2,700 Supplies 0.15 1,050 Other 1,950 0.08 *Varies per unit sold, not per unit produced a. Assuming that the desired ending inventories of materials A and B are 8,000 and 10,000 pounds, respectively, and that work-in-process inventories are immaterial, prepare budgets for the calendar quarter in which the new product will be introduced for each of the following operating factors: Do not use negative signs with any of your answers below.

Answer 1

Answer is given below with full working

$962,000 Sales 1. Total Sales $53 $530,000 $48 $432,000 Working Urban Units SP 10,000 Rural 9,000 27,000 Units Production 2. Sales Add : Desired closing inventory Total produciton (Units) 19,000 8,000 27,000 Material purchase cost 3. Material A Material B Total points(lbs) required of production Desired ending material inventory Total pounds to be available 108,000 54,000 8,000 10,000 116,000 64,000 Beginning materials inventory Total material to be purchased (Ibs) 64,000 116,000 Cost per unit $3.15 $4.65 $365,400$297,600 Total Material purchases ($) Direct Labor Cost $202,500 4. Manufacturing overhead costs 5. Fixed Variable Total Depreciation Factory Supplies Supervisory salaries Other $7,650 $7,650 $24,300 $28,800 $4,500 $28,800 $28,800 $20,250 $43,200 $44,550$108,450 $22,950 $63,900 Total manufacturing expenses Selling and administrative budget 6. Variable Fixed Total Selling expense Advertising sales salaries and commission $22,500 $43,500 $22,500 $28,500 $17,100 $45,600 $15,000 other Total selling expenses Administrative expenses Office salaries Supplies $3,000 $20,100 $40,500 $86,100 $2,700 $2,700 $1,050 $4,050 $2,160 $5,100 $1,950 $4,110 Other $5,700 Total Administrative expenses $11,910 $98,010 $6,210 $51,810 Total Selling and administrative expenses $46,200 Clinton Corporation 7. Budgeted Income Statement For the Quarter Ended March 31st, 2016 $962,000 Sales Cos of Goods Sold Beginning Inventory Finished Goods Material Beginning Inventory Material purchase Material available $663,000 $663,000 Ending Inventory-Material Direct Material Direct Labor $71,700 $591,300 $202,500 $108,450 Manufacturing Overhead Total Manufacturing Cost Cost of Goods available for Sale $902,250 $902,250 Ending Inventory- Finished Goods Cost of Goods sold $267,333 $634,917 Gross Profit $327,083 Operating Expenses Selling expenses Administrative expense $86,100 $11,910 Total Operating expenses Income before Income tax $98,010 $229,073 Income tax expense at 30% $68,722 Net Income $160,351