Budgeted Income Statement and Supporting Budgets

The budget director of Feathered Friends Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for December:

1. Estimated sales for December:

   Bird house	3,200 units at $50 per unit
   Bird feeder	3,000 units at $70 per unit

2. Estimated inventories at December 1:

   Direct materials:
   Wood	200 ft.
   Plastic	240 lbs.
   Finished products:
   Bird house	320 units at $27 per unit
   Bird feeder	270 units at $40 per unit

3. Desired inventories at December 31:

   Direct materials:
   Wood	220 ft.
   Plastic	200 lbs.
   Finished products:
   Bird house	290 units at $27 per unit
   Bird feeder	250 units at $41 per unit

4. Direct materials used in production:

   In manufacture of Bird House:
   Wood	0.80 ft. per unit of product
   Plastic	0.50 lb. per unit of product
   In manufacture of Bird Feeder:
   Wood	1.20 ft. per unit of product
   Plastic	0.75 lb. per unit of product

5. Anticipated cost of purchases and beginning and ending inventory of direct materials:

   Wood	$7.00 per ft.
   Plastic	$1.00 per lb.

6. Direct labor requirements:

   Bird House:
   Fabrication Department	0.20 hr. at $16 per hr.
   Assembly Department	0.30 hr. at $12 per hr.
   Bird Feeder:
   Fabrication Department	0.40 hr. at $16 per hr.
   Assembly Department	0.35 hr. at $12 per hr.

7. Estimated factory overhead costs for December:

   Indirect factory wages	$75,000
   Depreciation of plant and equipment	23,000
   Power and light	6,000
   Insurance and property tax	5,000

8. Estimated operating expenses for December:

   Sales salaries expense	$70,000
   Advertising expense	18,000
   Office salaries expense	21,000
   Depreciation expenseoffice equipment	600
   Telephone expenseselling	550
   Telephone expenseadministrative	250
   Travel expenseselling	4,000
   Office supplies expense	200
   Miscellaneous administrative expense	400

9. Estimated other income and expense for December:

   Interest revenue	$200
   Interest expense	122

10. Estimated tax rate: 30%

6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be $29,000, and work in process at the end of December is estimated to be $35,400. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Feathered Friends Inc. Cost of Goods Sold Budget For the Month Ending December 31
Direct materials inventory, December 1Direct materials inventory, December 31Direct materials purchasesFactory overheadFinished goods inventory, December 1Finished goods inventory, December 31			fill in the blank 61
Direct materials inventory, December 1Direct materials inventory, December 31Direct materials purchasesFactory overheadWork in process inventory, December 1Work in process inventory, December 31		fill in the blank 63
Direct materials:
Direct materials inventory, December 1Direct materials inventory, December 31Finished goods inventory, December 1Finished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31	fill in the blank 65
Direct laborDirect materials purchasesFactory overheadFinished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31	fill in the blank 67
Cost of direct materials available for use	fill in the blank 68
Direct materials inventory, December 1Direct materials inventory, December 31Finished goods inventory, December 1Finished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31	fill in the blank 70
Cost of direct materials placed in production	fill in the blank 71
Direct laborDirect materials purchasesFinished goods inventory, December 1Finished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31	fill in the blank 73
Direct materials purchasesFactory overheadFinished goods inventory, December 1Finished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31	fill in the blank 75
Total manufacturing costs		fill in the blank 76
Total work in process during period		fill in the blank 77
Direct materials inventory, December 1Direct materials inventory, December 31Finished goods inventory, December 1Finished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31		fill in the blank 79
Cost of goods manufactured			fill in the blank 80
Cost of finished goods available for sale			fill in the blank 81
Direct materials inventory, December 1Direct materials inventory, December 31Finished goods inventory, December 1Finished goods inventory, December 31Work in process inventory, December 1Work in process inventory, December 31			fill in the blank 83
Cost of goods sold			fill in the blank 84

7. Prepare a selling and administrative expenses budget for December.

Feathered Friends Inc. Selling and Administrative Expenses Budget For the Month Ending December 31
Selling expenses:
Depreciation expenseoffice equipmentMiscellaneous administrative expenseOffice salaries expenseOffice supplies expenseSales salaries expenseTelephone expenseadministrative		$fill in the blank 86
Advertising expenseDepreciation expenseoffice equipmentMiscellaneous administrative expenseOffice salaries expenseOffice supplies expenseTelephone expenseadministrative		fill in the blank 88
Depreciation expenseoffice equipmentMiscellaneous administrative expenseOffice salaries expenseOffice supplies expenseTelephone expenseadministrativeTelephone expenseselling		fill in the blank 90
Depreciation expenseoffice equipmentMiscellaneous administrative expenseOffice salaries expenseOffice supplies expenseTelephone expenseadministrativeTravel expenseselling		fill in the blank 92
Total selling expenses			$fill in the blank 93
Administrative expenses:
Advertising expenseOffice salaries expensePower and lightSales salaries expenseTelephone expensesellingTravel expenseselling		$fill in the blank 95
Advertising expenseDepreciation expenseoffice equipmentPower and lightSales salaries expenseTelephone expensesellingTravel expenseselling		fill in the blank 97
Advertising expensePower and lightSales salaries expenseTelephone expenseadministrativeTelephone expensesellingTravel expenseselling		fill in the blank 99
Advertising expenseOffice supplies expensePower and lightSales salaries expenseTelephone expensesellingTravel expenseselling		fill in the blank 101
Advertising expenseMiscellaneous administrative expensePower and lightSales salaries expenseTelephone expensesellingTravel expenseselling		fill in the blank 103
Total administrative expenses			fill in the blank 104
Total operating expenses			$fill in the blank 105

8. Prepare a budgeted income statement for December. In the Other revenue and expense section, indicate expenses as negative amounts.

Feathered Friends Inc. Budgeted Income Statement For the Month Ending December 31
Gross profitIncome before income taxInterest expenseInterest revenueRevenue from sales			$fill in the blank 107
Administrative expensesCost of goods soldIncome tax expenseInterest expenseSelling expenses			fill in the blank 109
Gross profitInterest revenueNet incomeNet lossRevenue from sales			$fill in the blank 111
Operating expenses:
Cost of goods soldInterest revenueNet incomeNet lossSelling expenses		$fill in the blank 113
Administrative expensesGross profitInterest revenueNet incomeNet loss		fill in the blank 115
Total operating expenses			fill in the blank 116
Income from operations			$fill in the blank 117
Other revenue and expense:
Gross profitInterest expenseInterest revenueNet incomeRevenue from sales		$fill in the blank 119
Cost of goods soldGross profitInterest expenseInterest revenueNet loss		fill in the blank 121	fill in the blank 122
Income before income tax			$fill in the blank 123
Cost of goods soldGross profitIncome tax expenseInterest revenueNet loss			fill in the blank 125
Net income			$fill in the blank 126