Budgeted Income Statement and Supporting Budgets

The budget director of Birding Homes & Feeders 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:

Estimated sales for January:

Bird house 15,000 units at $25 per unit

Bird feeder 40,000 units at $15 per unit

Estimated inventories at January 1:

Direct materials:

Wood 600 ft.

Plastic 1,000 lbs.

Finished products:

Bird house 1,000 units at $15 per unit

Bird feeder 2,500 units at $8 per unit

Desired inventories at January 31:

Direct materials:

Wood 500 ft.

Plastic 1,250 lbs.

Finished products:

Bird house 1,500 units at $15 per unit

Bird feeder 3,000 units at $8 per unit

Direct materials used in production:

In manufacture of Bird House:

Wood 0.80 ft. per unit of product

Plastic 0.10 lb. per unit of product

In manufacture of Bird Feeder:

Wood 0.20 ft. per unit of product

Plastic 1.00 lb. per unit of product

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

Wood $2.50 per ft.

Plastic $0.80 per lb.

Direct labor requirements:

Bird House:

Fabrication Department 0.40 hr. at $18 per hr.

Assembly Department 0.20 hr. at $12 per hr.

Bird Feeder:

Fabrication Department 0.25 hr. at $18 per hr.

Assembly Department 0.10 hr. at $12 per hr.

Estimated factory overhead costs for January:

Indirect factory wages $40,000

Depreciation of plant and equipment 20,000

Power and light 10,000

Insurance and property tax 5,000

Estimated operating expenses for January:

Sales salaries expense $125,000

Advertising expense 80,000

Office salaries expense 40,000

Depreciation expenseoffice equipment 4,000

Travel expenseselling 25,000

Office supplies expense 2,500

Miscellaneous administrative expense 3,500

Estimated other revenue and expense for January:

Interest revenue $4,540

Interest expense 3,000

Estimated tax rate: 25%

Required:

1. Prepare a sales budget for January.

Birding Homes & Feeders Inc.

Sales Budget

For the Month Ending January 31

Unit Sales

Volume Unit Selling

Price Total Sales

Bird house fill in the blank 1 $fill in the blank 2 $fill in the blank 3

Bird feeder fill in the blank 4 fill in the blank 5 fill in the blank 6

Total revenue from sales $fill in the blank 7

2. Prepare a production budget for January. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Birding Homes & Feeders Inc.

Production Budget

For the Month Ending January 31

Units

Bird House Bird Feeder

Expected units to be sold

fill in the blank 9 fill in the blank 10

Desired inventory, January 31

fill in the blank 12 fill in the blank 13

Total units available

fill in the blank 15 fill in the blank 16

Estimated inventory, January 1

fill in the blank 18 fill in the blank 19

Total units to be produced

fill in the blank 21 fill in the blank 22

3. Prepare a direct materials purchases budget for January. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Birding Homes & Feeders Inc.

Direct Materials Purchases Budget

For the Month Ending January 31

Wood Plastic Total

Required units for production:

Bird house fill in the blank 23 fill in the blank 24

Bird feeder fill in the blank 25 fill in the blank 26

Desired units of inventory, January 31 fill in the blank 27 fill in the blank 28

Total units available fill in the blank 29 fill in the blank 30

Estimated units of inventory, January 1 fill in the blank 31 fill in the blank 32

Total units to be purchased fill in the blank 33 fill in the blank 34

Unit price $fill in the blank 35 $fill in the blank 36

Total direct materials to be purchased $fill in the blank 37 $fill in the blank 38 $fill in the blank 39

4. Prepare a direct labor cost budget for January.

Birding Homes & Feeders Inc.

Direct Labor Cost Budget

For the Month Ending January 31

Fabrication

Department Assembly Department Total

Hours required for production:

Bird house fill in the blank 40 fill in the blank 41

Bird feeder fill in the blank 42 fill in the blank 43

Total fill in the blank 44 fill in the blank 45

Hourly rate

$fill in the blank 46 $fill in the blank 47

Total direct labor cost $fill in the blank 48 $fill in the blank 49 $fill in the blank 50

5. Prepare a factory overhead cost budget for January.

Birding Homes & Feeders Inc.

Factory Overhead Cost Budget

For the Month Ending January 31

Indirect factory wages

$fill in the blank 52

Depreciation of plant and equipment

fill in the blank 54

Power and light

fill in the blank 56

Insurance and property tax

fill in the blank 58

Total factory overhead cost $fill in the blank 59

6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be $9,000, and work in process at the end of January is estimated to be $10,500. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Birding Homes & Feeders Inc.

Cost of Goods Sold Budget

For the Month Ending January 31

Finished goods inventory, January 1

$fill in the blank 61

Work in process inventory, January 1

$fill in the blank 63

Direct materials:

Direct materials inventory, January 1

$fill in the blank 65

Direct materials purchases

fill in the blank 67

Cost of direct materials available for use $fill in the blank 68

Direct materials inventory, January 31

fill in the blank 70

Cost of direct materials placed in production $fill in the blank 71

Direct labor

fill in the blank 73

Factory overhead

fill in the blank 75

Total manufacturing costs fill in the blank 76

Total work in process during period $fill in the blank 77

Work in process inventory, January 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

fill in the blank 83

Cost of goods sold $fill in the blank 84

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

Birding Homes & Feeders Inc.

Selling and Administrative Expenses Budget

For the Month Ending January 31

Selling expenses:

Depreciation expenseoffice equipment

$fill in the blank 86

fill in the blank 88

fill in the blank 90

Total selling expenses $fill in the blank 91

Administrative expenses:

$fill in the blank 93

fill in the blank 95

fill in the blank 97

fill in the blank 99

Total administrative expenses fill in the blank 100

Total operating expenses $fill in the blank 101

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

Birding Homes & Feeders Inc.

Budgeted Income Statement

For the Month Ending January 31

$fill in the blank 103

fill in the blank 105

$fill in the blank 107

Operating expenses:

$fill in the blank 109

fill in the blank 111

Total operating expenses fill in the blank 112

Operating income $fill in the blank 113

Other revenue and expense:

$fill in the blank 115

fill in the blank 117 fill in the blank 118

Income before income tax $fill in the blank 119

fill in the blank 121

Net income $fill in the blank 122