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%

Required:

1. Prepare a sales budget for December. Feathered Friends Inc. Sales Budget For the Month Ending December 31 Unit Sales Unit Selling Volume Price Total Sales Bird house S Bird feeder Total revenue from sales S 2. Prepare a production budget for December. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Feathered Friends Inc. Production Budget For the Month Ending December 31 Units Bird House Bird Feeder Expected units to be sold Desired inventory, December 31 Total units available Estimated inventory, December 1 Total units to be produced 3. Prepare a direct materials purchases budget for December. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Feathered Friends Inc. Direct Materials Purchases Budget For the Month Ending December 31 Wood Plastic Total Required units for production: Bird house Bird feeder Desired units of inventory, December 31 Total units available Estimated units of inventory, December 1 Total units to be purchased Unit price Total direct materials to be purchased 4. Prepare a direct labor cost budget for December Feathered Friends Inc. Direct Labor Cost Budget For the Month Ending December 31 Fabrication Assembly Department Department Total Hours required for production: Bird house Bird feeder Total Hourly rate Total direct labor cost S 5. Prepare a factory overhead cost budget for December. Feathered Friends Inc. Factory Overhead Cost Budget For the Month Ending December 31 Indirect factory wages Depreciation of plant and equipment Power and light Insurance and property tax Total factory overhead cost 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 Finished goods inventory, December 1 Work in process inventory, December 1 Direct materials: Direct materials inventory, December 1 Direct materials purchases $ Cost of direct materials available for use Direct materials inventory, December 31 Cost of direct materials placed in production $ Direct labor Factory overhead Total manufacturing costs Total work in process during period $ Work in process inventory, December 31 Cost of goods manufactured Cost of finished goods available for sale Finished goods inventory, December 31 Cost of goods sold 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: Sales salaries expense $ Vi Advertising expense Telephone expense-selling Travel expense-selling SS Total selling expenses Administrative expenses: Office salaries expense $ $ Depreciation expense-office equipment Ill Telephone expense-administrative Office supplies expense Miscellaneous administrative expense Total administrative expenses Total operating expenses SS 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 Revenue from sales SS Cost of goods sold Gross profit $$ Operating expenses: Selling expenses SS Administrative expenses Total operating expenses Income from operations S$ Other revenue and expense: Interest revenue $$ Interest expense Income before income tax Income tax expense SS Net income $ $