Budget Based on the budgeted income statement calculated above for 20XY, put together a new budgeted income for 20XZ assuming that the production and sales is double the level of 20XY.

This is the information below:

1.Financial Statements:Develop an Income Statement for 20XX, Cash Flow Statement for 20XX, and Balance Sheetas of the end of 20XXbased on the data provided below for year 20XX. All sales are collected when the sale is made and all expenses are paid when the expense is incurred. Explain the purpose of each financial statement.

a.Income Statement Data for 20XX:

Units produced and sold = 420

Sales ($80 per unit selling price) = $33600

Cost of goods sold ($30 per unit, all variable costs) = $12600

Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves)

Advertising fees =$2000

Bank fees = $150

Phone/internet = $1200

Shipping ($3 per unit) = $1260

Utilities = $900

Office supplies = $800

Interest expense on note payable = $350

Depreciation expense (straight line) = $800

Income tax rate = 26 %

b.Other Financial Data for 20XX:

Proceeds from sale of equipment = $3000.The equipment originally cost $1000 and had accumulated depreciation of $200.

Purchase of equipment = $1600 (The machine is purchased on the last day of 20XX so no depreciation expense is recorded.)

Repayment of note payable = $5000

Consider any data relevant from the income statement.

c.Balance Sheet Data forBeginning of 20XX:

Cash and cash equivalents = $10000

Accounts receivable = $0 (Cash is received at time of sale)

Raw materials inventory = $10500

Equipment = $5000 (This includes the $1000 cost of the equipment sold in 20XX).

Accumulated depreciation = $1,000 (This includes the accumulated depreciation of 200 for the equipment sold in 20XX.

Accounts payable = $0 (Cash is paid at the time of purchase.)

Note payable = $5000 (This is the note payable which is repaid in 20XX)

Common stock = $15000

Retained earnings = $4500

2.Financial Ratios:Calculate the following financial ratios and explain the meaning of the results.

a.Net Profit Margin

b.Quick Ratio

c.Debt-to-Equity Ratio

3.Cost Classification:The Lee's have provided you with the following costs and relevant information that are assumed for year 20XY.

A. Classify each of the costs (a. through j.) below under C. as a variable cost or a fixed cost.

B. Explain the importance of distinguishing between variable and fixed costs.

C. The budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information.

a.Cost of goods sold of $35 per unit

b.Labor = $400/month

One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month.

c.Advertising fees = $3,000

d.Bank fees = $200

e.Phone/internet =$150 per month

f.Shipping = $3 per unit

g.Utilities = $100 per month

h.Office Supplies = $900

i.Conference Exhibitor Fee = $3000

j.Travel Expenses for Conference (e.g. airfare, meals, taxi) = $1200