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 lb.
   Foam lining	80 lb.
   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 lb.
   Foam lining	65 lb.
   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	1.20 lb. per unit of product
   Foam lining	0.50 lb. per unit of product
   In manufacture of football helmet:
   Plastic	3.50 lb. per unit of product
   Foam lining	1.50 lb. per unit of product

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

   Plastic	$6.00 per lb.
   Foam lining	$4.00 per lb.

6. Direct labor requirements:

   Batting helmet:
   Molding Department	0.20 hr. at $20 per hr.
   Assembly Department	0.50 hr. at $14 per hr.
   Football helmet:
   Molding Department	0.50 hr. at $20 per hr.
   Assembly Department	1.80 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%

Required:

1. Prepare a sales budget for March.

Gold Medal Athletic Co. Sales Budget For the Month Ending March 31
	Unit Sales Volume	Unit Selling Price			Total Sales
Batting helmet		$			$
Football helmet
Total revenue from sales					$

2. Prepare a production budget for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Production Budget For the Month Ending March 31
	Units
	Batting helmet	Football helmet
Expected units to be sold
Plus desired inventory, March 31
Total units required
Less estimated inventory, March 1
Total units to be produced

3. Prepare a direct materials purchases budget for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Direct Materials Purchases Budget For the Month Ending March 31
		Plastic		Foam Lining		Total
Units required for production:
Batting helmet
Football helmet
Plus desired units of inventory, March 31
Total units required
Less estimated units of inventory, March 1
Total units to be purchased
Unit price	$		$
Total direct materials to be purchased	$		$		$

4. Prepare a direct labor cost budget for March.

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
Football helmet
Total hours required
Hourly rate	$		$
Total direct labor cost	$		$		$

5. Prepare a factory overhead cost budget for March.

Gold Medal Athletic Co. Factory Overhead Cost Budget For the Month Ending March 31
Indirect factory wages	$
Depreciation of plant and equipment
Power and light
Insurance and property tax
Total	$

6. 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. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Cost of Goods Sold Budget For the Month Ending March 31
Direct materials:
Cost of direct materials available for use
Cost of direct materials placed in production
Total manufacturing costs
Total work in process during the period
Cost of goods manufactured
Cost of finished goods available for sale
Cost of goods sold			$

7. Prepare a selling and administrative expenses budget for March.

Gold Medal Athletic Co. Selling and Administrative Expenses Budget For the Month Ending March 31
Selling expenses:
Sales salaries expense
Advertising expense
Telephone expense—selling
Travel expense—selling
Total selling expenses
Administrative expenses:
Office salaries expense
Depreciation expense—office equipment
Telephone expense—administrative
Office supplies expense
Miscellaneous administrative expense
Total administrative expenses
Total operating expenses			$

8. Prepare a budgeted income statement for March. Enter all amounts as positive numbers.

Gold Medal Athletic Co. Budgeted Income Statement For the Month Ending March 31
Operating expenses:
Total operating expenses
Income from operations
Other income:
Other expenses:
Income before income tax
Net income			$

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.