Budgeted income statement and supporting budgets for three months Newport Inc. gathered the following data for use in developing the budgets for the first quarter June, July, August) of its fiscal year: a. Estimated sales at $36 per unit: June 300,000 units July August September 400,000 units 500,000 units 500,000 units b. Estimated finished goods inventories: May 31 June 30 July 31 August 31 16,000 units 5% of next month's sales 5% of next month's sales 5% of next month's sales c. Work in process inventories are estimated to be insignificant (zero) d. Estimated direct materials inventories: May 31 June 30 July 31 August 31 35,000 pounds 40,000 pounds 45,000 pounds 50,000 pounds e. Manufacturing costs: Per Unit Direct materials (1.5 lbs. per unit x $4 per lb.) $ 6.00 10.00 Direct labor (0.4 hr. per unit x $25 per hr.) 1.60 Variable factory overhead ($4 per direct labor hour) Fixed factory overhead ($1,200,000 per month allocated using 500,000 units) 2.40 Total per-unit manufacturing costs $20.00 f. Selling expenses: Variable selling expenses $3 per unit $800,000 Fixed selling expenses Administrative expenses (all fixed costs) $550,000 1. Prepare a sales budget for August. June 300,000 Newport Inc. Sales Budget For the First Quarter Ending August 31 July August 400,000 500,000 36 *$ 36 Estimated units sold Selling price per unit x$ Total budgeted sales $ XS $ First Quarter 1,200,000 36 10,800,000 $ 14,400,000 $ 18,000,000 43,200,000 2. Prepare a production budget for August. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Newport Inc. Production Budget For the First Quarter Ending August 31 June July 300,000 400,000 Estimated units sold August 500,000 First Quarter 1,200,000 Desired ending inventory 20,000 25,000 25,000 25,000 320,000 1,225,000 Total units available for sale Less estimated beginning inventory 425,000 -20,000 525,000 -25,000 -16,000 - 16,000 Total units to be produced 304,000 405,000 500,000 1,209,000 3. Prepare a direct materials purchases budget for August. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Newport Inc. Direct Materials Purchases Budget For the First Quarter Ending August 31 June July 304,000 405,000 1.5 lbs x 1.5 lbs Units to be produced Materials required per unit x August 500,000 1.5 lbs 750,000 lbs. 50,000 lbs. x Materials required for production Desired ending inventory 607,500 lbs. 45,000 lbs. First Quarter 1,209,000 1.5 lbs. 1,813,500 lbs. 50,000 lbs. 1,863,500 lbs. -35,000 lbs. 1,828,500 lbs. 456,000 lbs. 40,000 lbs. 496,000 lbs. - 35,000 lbs. 461,000 lbs. Total materials available for use Less estimated beginning inventory 652,500 lbs. -40,000 lbs. 612,500 lbs. 800,000 lbs. -45,000 lbs. 755,000 lbs. Total materials to be purchased Cost per pound Cost of direct materials to be purchased $1,844,000 $2,450,000 $3,020,000 $7,314,000 4. Prepare a direct labor cost budget for August. Units to be produced V Direct labor required per unit Newport Inc. Direct Labor Cost Budget For the First Quarter Ending August 31 June July 304,000 405,000 0.4 hr. X 0.4 hr. X 121,600 hrs. 162,000 hrs. 25 *$ 25 *$ $ 3,040,000 $ 4,050,000 $ Direct labor hours required for production August 500,000 0.4 hr. 200,000 hrs. 25 5,000,000 First Quarter 1,209,000 0.4 hr. 483,600 hrs. x$ 25 $12,090,000 Direct labor hourly rate Direct labor cost V Feedback 5. Prepare a factory overhead cost budget for August. Newport Inc. Factory Overhead Cost Budget For the First Quarter Ending August 31 June July August First Quarter Variable factory overhead: Budgeted direct labor hours | 121,600 hrs. 162,000 hrs. 200,000 hrs. 483,600 hrs. Variable factory overhead rate x$ Budgeted variable factory overhead $ 486,400 $ 648,000 $ 800,000 $ 1,934,400 Fixed factory overhead: Budgeted fixed factory overhead 1,200,000 1,200,000 $1,848,000 1,200,000 2,000,000 3,600,000 $5,534,400 Total factory overhead cost $1,686,400 $ 6. Prepare a cost of goods sold budget for August. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Newport Inc. Cost of Goods Sold Budget For the First Quarter Ending August 31 June July August First Quarter Beginning finished goods inventory Cost of goods manufactured: Direct materials 1,850,000 $ X $ X $ Direct labor 3,050,000 X X x 2,450,000 4,050,000 1,848,000 8,348,000 3,020,000 5,000,000 2,000,000 10,020,000 7,320,000 12,100,000 5,536,000 24,956,000 Factory overhead V X 1,688,000 Total cost of goods manufactured $ 6,588,000 X $ X $ $ Estimated units sold x 500,000 X 1,200,000 300,000 22 400,000 21 X x Cost of goods sold x 20 x $ 21 7. Prepare a selling and administrative expenses budget for August. Enter all amounts as positive number. Newport Inc. Selling and Administrative Expenses Budget For the First Quarter Ending August 31 June July August First Quarter Selling expenses: Budgeted sales units V Variable selling expenses per unit sold x$ 300,000 3 900,000 800,000 x $ 400,000 3 1,200,000 800,000 2,000,000 x $ 500,000 3 1,500,000 800,000 x$ $ 1,200,000 3 3,600,000 2,400,000 Total variable selling expenses Fixed selling expenses $ 1,700,000 $ $ 2,300,000 $ 6,000,000 Total selling expenses Administrative expenses: Budgeted fixed administrative expenses 550,000 550,000 2,550,000 550,000 2,850,000 1,650,000 7,650,000 Total selling and administrative expenses 2,250,000 $ $ $ V 8. Prepare a budgeted income statement with budgeted operating income for August. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Newport Inc. Budgeted Income Statement For the First Quarter Ending August 31 June July 10,800,000 $ 14,400,000 Sales First Quarter 43,200,000 $ August 18,000,000 -10,020,000 $ $ Cost of goods sold -6,588,000 X X 24,956,000 X X X -8,348,000 6,052,000 4,212,000 $ 7,980,000 X $ 1,824,400 Gross profit Selling and administrative expenses: Selling expenses -900,000 X $ - 1,200,000 X $ -1,500,000 X $ -3,600,000 Fixed selling expenses x -800,000 -800,000 -800,000 -2,400,000 Total selling and administrative expenses $ -550,000 -550,000 - 1,650,000 -550,000 3,502,000 Operating income $ 1,962,000 X $ X $ 5,130,000 X $ 10,594,000 94,000 X