7.50 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 5,000 units in the urban region at a unit price of $53 and 4,000 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 3,000-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) Manufacturing overhead: Depreciation - $7,650 Factory supplies 0.90 4,500 Supervisory salaries - 28,800 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 0.08 1,950 *Varies per unit sold, not per unit produced. a. Assuming that the desired ending inventories of materials A and B are 3,000 and 5,000 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. 1. Total sales $ 457000 2. Production OX OX 0 x 0 X OX OX OX $ Sales salaries and commissions Other Total selling expenses Administrative expenses: Office salaries Supplies Other Total administrative expenses Total selling and administrative expenses $ Ox $ 0x 0 X 0 0x 0 x 0x Ox Ox 0x 0x $ $ b. Using data generated in requirement (a), prepare a budgeted income statement for the calendar quarter. Assume an overall effective income tax rate of 30%. Round answers to the nearest whole number. Do not use negative signs with your answers. $ 0x 0 Clinton Corporation Budgeted Income Statement For the Quarter Ended March 31, 2016 Sales Cost of Goods Sold: Beginning Inventory - Finished Goods $ Material: Beginning Inventory - Material Material Purchases 0 x Material Available OX Ending Inventory - Material 0x Direct Material 0 x Direct Labor 0 x Manufacturing Overhead 0 x Total Manufacturing Cost Cost of Goods Available for Sale Ending Inventory - Finished Goods Cost of Goods Sold Gross Profit Operating Expenses: Selling Expenses Administrative Expenses 0 X OX 0 X OX OX $ 0x Do not use negative signs with your answers. Clinton Corporation Budgeted Income Statement For the Quarter Ended March 31, 2016 Sales Cost of Goods Sold: Beginning Inventory - Finished Goods Material: Beginning Inventory - Material Material Purchases Material Available Ending Inventory - Material Direct Material Direct Labor Manufacturing Overhead Total Manufacturing Cost Cost of Goods Available for Sale Ending Inventory - Finished Goods Cost of Goods Sold Gross Profit Operating Expenses: Selling Expenses Administrative Expenses Total Operating Expenses Income before Income Taxes Income Tax Expense Net Income ooooooo 0 X 0 x OX OX OX