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	400,000	units
August	500,000	units
September	500,000	units

b. Estimated finished goods inventories:

May 31	16,000	units
June 30	5%	of next months sales
July 31	5%	of next months sales
August 31	5%	of next months sales

c. Work in process inventories are estimated to be insignificant (zero).

d. Estimated direct materials inventories:

May 31	35,000	pounds
June 30	40,000	pounds
July 31	45,000	pounds
August 31	50,000	pounds

e. Manufacturing costs:

	Per Unit
Direct materials (1.5 lbs. per unit $4 per lb.)	$ 6.00
Direct labor (0.4 hr. per unit $25 per hr.)	10.00
Variable factory overhead ($4 per direct labor hour)	1.60
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
Fixed selling expenses	$800,000
Administrative expenses (all fixed costs)	$550,000

1. Prepare a sales budget for August.

Newport Inc.
Sales Budget
For the First Quarter Ending August 31
	June	July	August	First Quarter
Estimated units sold	300,000	400,000	500,000	1,200,000
Selling price per unit	x$36	x$36	x$36	x$36
Total budgeted sales	$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	August	First Quarter
Estimated units sold	300,000	400,000	500,000	1,200,000
Desired ending inventory	20,000	25,000	25,000	25,000
Total units available for sale	320,000	425,000	525,000	1,225,000
Less estimated beginning inventory	-16,000	-20,000	-25,000	-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	August	First Quarter
Units to be produced	304,000	405,000	500,000	1,209,000
Materials required per unit	X 1.5 lbs.	x 1.5 lbs.	x 1.5 lbs.	x 1.5 lbs.
Materials required for production	456,000 lbs.	607,500 lbs.	750,000 lbs.	1,813,500 lbs.
Desired ending inventory	40,000 lbs.	45,000 lbs.	50,000 lbs.	50,000 lbs.
Total materials available for use	496,000 lbs.	652,500 lbs.	800,000 lbs.	1,863,500 lbs.
Less estimated beginning inventory	-35,000 lbs.	-40,000 lbs.	-45,000 lbs.	-35,000 lbs.
Total materials to be purchased	461,000 lbs.	612,500 lbs.	755,000 lbs.	1,828,500 lbs.
Cost per pound	x $4	x$4	x$4	x$4
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.

Newport Inc.
Direct Labor Cost Budget
For the First Quarter Ending August 31
	June	July	August	First Quarter
Units to be produced	304,000	405,000	500,000	1,209,000
Direct labor required per unit	x 0.4 hr.	x 0.4 hr.	x 0.4 hr.	x 0.4 hr.
Direct labor hours required for production	121, 600 hrs.	162,000 hrs.	200,000 hrs.	482,600 hrs.
Direct labor hourly rate	x$25	x$25	x$25	x$25
Direct labor cost	$3,040,000	$4,050,000	$5,000,000	$12,090,000

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	162,000	200,000	483,600
Variable factory overhead rate	x $4	x $4	x $4	x $4
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	1,200,000	3,600,000
Total factory overhead cost	$1,686,400	$1,848,000	$2,000,000	$5,534,400

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	$	$	$	$
Direct labor
Factory overhead
Total cost of goods manufactured	$	$	$	$
Cost of finished goods available for sale	$	$	$	$
Ending finished goods inventory
Cost of goods sold	$	$	$	$

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
Variable selling expenses per unit sold	x$	x$	x$	x$
Total variable selling expenses	$	$	$	$
Fixed selling expenses
Total selling expenses	$	$	$	$
Administrative expenses:
Budgeted fixed administrative expenses
Total selling and administrative expenses	$	$	$	$

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	August	First Quarter
Sales	$	$	$	$
Cost of goods sold
Gross profit	$	$	$	$
Selling and administrative expenses:
Selling expenses	$	$	$	$
Administrative expenses
Total selling and administrative expenses	$	$	$	$
Operating income	$	$	$	$