1.Month Unit Sales Month Unit Sales

January 15 April 18

February 12 May 22

March 16 June 20

The beginning inventory for the year is 7 units. The budgeted inventory at the end of a month is 50% of units to be sold the following month. The purchase price per unit is $800.

Prepare a purchase budget in units and dollars for each month, January through May.

Thunder Road Guitars

Purchases Budget January - May

Purchase units: January February March April May

Answer Answer Answer Answer Answer

Purchase dollars: Answer Answer Answer Answer Answer

2.Supplies $12,000

Temporary and seasonal wages $32,000

Wages of full-time employees $200,000

Supervisor salaries $60,000

Rent $48,000

Insurance $16,000

Utilities $10,000

Miscellaneous $9,600

Contingencies and equipment $25,000

Total $412,600

Required

Prepare an incremental cash budget for next year, assuming the planned total budget increase is 3%. Budget details include a budget increment for salaries and wages of 3%, no change in rent, and 2.5% increases in the budget for supplies and miscellaneous. Utility companies have received approvals for rate increases amounting to 2% and insurance companies have announced an increase in premiums of 4%. (Hint: The Contingencies and equipment budget is a plug.)

Wood County Department of Motor VehiclesIncremental BudgetFor Next Year

Supplies Answer

Temporary and seasonal wages Answer

Wages of full-time employees Answer

Supervisor salaries Answer

Rent Answer

Insurance Answer

Utilities Answer

Miscellaneous Answer

Contingencies and equipment Answer

Total Answer

3.Gross sales $1,200,000

Less uncollectible accounts 26,000

Collected sales 1,174,000

Cost of goods sold 780,000

Profit before operating expense 394,000

Operating expenses

(including $15,000 depreciation) 206,000

Income before tax $188,000

The following are management's goals and forecasts for next year:

1.Selling prices will increase by 3%, and sales volume will increase by 5%.2. The cost of the merchandise will increase by 2%.3. All operating expenses are fixed. Price increases for operating expenses will be 4%. The company uses straight-line depreciation.4.The estimated uncollectible are 2% of budgeted sales.

Required

Prepare a budgeted functional income statement for next year.

Do not use negative signswith any of your answers.

Quality WoolCompany

Budgeted Income Statement

For the Year Ending December 31 Sales Answer

Less uncollectible accounts Answer

Collected sales Answer

Cost of goods sold Answer

Profit before operating expense Answer

Operating expenses Answer

Income before tax Answer