Budgeted Income Statement and Supporting Budgets

The budget director of Birds and Beyond 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 January:

1. Estimated sales for January:

   Birdhouse	7,500 units at $66 per unit
   Bird feeder	5,000 units at $82 per unit

2. Estimated inventories at January 1:

   Direct materials:
   Wood	198 ft.
   Plastic	420 lb.
   Finished products:
   Birdhouse	500 units at $28 per unit
   Bird feeder	210 units at $40 per unit

3. Desired inventories at January 31:

   Direct materials:
   Wood	220 ft.
   Plastic	340 lb.
   Finished products:
   Birdhouse	400 units at $28 per unit
   Bird feeder	250 units at $40 per unit

4. Direct materials used in production:

   In manufacture of BirdHouse:
   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	$9.00 per ft.
   Plastic	$1.40 per lb.

6. Direct labor requirements:

   Birdhouse:
   Fabrication Department	0.25 hr. at $20 per hr.
   Assembly Department	0.30 hr. at $15 per hr.
   Bird Feeder:
   Fabrication Department	0.40 hr. at $20 per hr.
   Assembly Department	0.35 hr. at $15 per hr.

7. Estimated factory overhead costs for January:

   Indirect factory wages	$92,000
   Depreciation of plant and equipment	34,000
   Power and light	10,100
   Insurance and property tax	2,800

8. Estimated operating expenses for January:

   Sales salaries expense	$85,100
   Advertising expense	17,600
   Office salaries expense	19,200
   Depreciation expenseoffice equipment	1,100
   Telephone expenseselling	1,000
   Telephone expenseadministrative	400
   Travel expenseselling	3,800
   Office supplies expense	350
   Miscellaneous administrative expense	250

9. Estimated other income and expense for January:

   Interest revenue	$450
   Interest expense	294

10. Estimated tax rate: 25%

Birds and Beyond Inc. Cost of Goods Sold Budget For the Month Ending January 31 Finished goods inventory, January 1 22,400 Work in process inventory, January 1 33,600 Direct materials: Direct materials inventory, January 1 2,370 Direct materials purchases 59,810 X Cost of direct materials available for use 62,180 X Less: Direct materials inventory, January 31 -2,456 Cost of direct materials placed in production 59,724 X Direct labor 137,080 Factory overhead 138,900 Total manufacturing costs 335,704 X Total work in process during the period 369,304 X Less: Work in process inventory, January 31 -41,200 Cost of goods manufactured 328,104 X Cost of finished goods available for sale 350,504 X Cost of goods manufactured 328,104 X Cost of finished goods available for sale $ 350,504 X Less: Finished goods inventory, January 31 -21,200 Cost of goods sold $ 329,304 X Rectangular Snip 7. Prepare a selling and administrative expenses budget for January. Birds and Beyond Inc. Selling and Administrative Expenses Budget For the Month Ending January 31 Selling expenses: Sales salaries expense $ 85,100 Advertising expense 17,600 Telephone expense-selling 1,000 Travel expense-selling 3,800 Total selling expenses 107,500 Administrative expenses: Office salaries expense 1,100 x Office salaries expense 1,100 X Depreciation expense-office equipment 400 Telephone expense-administrative 19,200 x Office supplies expense 350 Miscellaneous administrative expense 250 Total administrative expenses 21,300 Total operating expenses 128,800 8. Prepare a budgeted income statement for January. Birds and Beyond Inc. Budgeted Income Statement For the Month Ending January 31 Revenue from sales $ 905,000 Cost of goods sold -329,304 X Gross profit 575,696 X Operating expenses: Gross profit 575,696 x Operating expenses: Selling expenses -107,500 Administrative expenses -21,300 Total operating expenses -128,800 Income from operations 446,896 x Other revenue: Interest revenue 450 Other expenses: Interest expense -294 156 Income before income tax $ 447,052 X Income tax (25% rate) -111,763 X Net income $ 335,289 X