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 2016:

Estimated sales for December:

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

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

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

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

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

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

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.

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

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

Estimated other income and expense for December:

Interest revenue $200 Interest expense 122

Estimated tax rate: 30%

Required:

1. Prepare a sales budget for December.

Feathered Friends Inc. Sales Budget For the Month Ending December 31, 2016 Unit Sales Volume Unit Selling Price Total Sales Bird house Bird feeder Total revenue from sales

2. Prepare a production budget for December.

Feathered Friends Inc. Production Budget For the Month Ending December 31, 2016 Units Bird House Bird Feeder Expected units to be sold Plus desired inventory, December 31, 2016 Total Less estimated inventory, December 1, 2016 Total units to be produced

3. Prepare a direct materials purchases budget for December.

Feathered Friends Inc. Direct Materials Purchases Budget For the Month Ending December 31, 2016 Wood Plastic Total Required units for production: Bird house Bird feeder Plus desired units of inventory, December 31, 2016 Total Less estimated units of inventory, December 1, 2016 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, 2016 Fabrication Department Assembly Department Total Hours required for production: Bird house Bird feeder Total Hourly rate Total direct labor cost

5. Prepare a factory overhead cost budget for December.

Feathered Friends Inc. Factory Overhead Cost Budget For the Month Ending December 31, 2016 Indirect factory wages Depreciation of plant and equipment Power and light Insurance and property tax Total

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.

Feathered Friends Inc. Cost of Goods Sold Budget For the Month Ending December 31, 2016 Finished goods inventory, December 1, 2016 Direct materials: Direct materials inventory, December 1, 2016 Cost of direct materials available for use Less: Direct materials inventory, December 31, 2016 Cost of direct materials placed in production Direct labor Factory overhead Total manufacturing costs Total work in process during the period Less: Work in process inventory, December 31, 2016 Cost of goods manufactured Cost of finished goods available for sale Less: Finished goods inventory, December 31, 2016 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, 2016 Selling expenses: Sales salaries expense Advertising expense Telephone expenseselling Travel expenseselling Total selling expenses Administrative expenses: Office salaries expense Depreciation expenseoffice equipment Telephone expenseadministrative Office supplies expense Miscellaneous administrative expense Total administrative expenses Total operating expenses

8. Prepare a budgeted income statement for December.

Feathered Friends Inc. Budgeted Income Statement For the Month Ending December 31, 2016 Revenue from sales Cost of goods sold Gross profit Operating expenses: Selling expenses Administrative expenses Total operating expenses Income from operations Other income: Interest revenue Other expenses: Interest expense Income before income tax Income tax expense (30% rate) Net income

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 2016: Estimated sales for December: Bird house 3,200 units at $50 per unit Bird feeder 3,000 units at $70 per unit 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 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 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 Anticipated cost of purchases and beginning and ending inventory of direct materials: Wood $7.00 per ft. Plastic $1.00 per lb. 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. 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 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 Estimated other income and expense for December: Interest revenue $200 Interest expense 122 Estimated tax rate: 30% Required: 1. Prepare a sales budget for December. Feathered Friends Inc. Sales Budget For the Month Ending December 31, 2016 Unit Sales Volume Unit Selling Price Total Sales Bird house 3,200 50 160,000 Bird feeder 3,000 70 210,000 Total revenue from sales 370,000 2. Prepare a production budget for December. Feathered Friends Inc. Production Budget For the Month Ending December 31, 2016 Units Bird House Bird Feeder Expected units to be sold 3,200 3,000 Plus desired inventory, December 31, 2016 290 250 Total 3,490 3,250 Less estimated inventory, December 1, 2016 320 270 Total units to be produced 3,170 2,980 3. Prepare a direct materials purchases budget for December. Feathered Friends Inc. Direct Materials Purchases Budget For the Month Ending December 31, 2016 Wood Plastic Total Required units for production: Bird house 2,536 1,600 Bird feeder 3,600 2,250 Plus desired units of inventory, December 31, 2016 220 200 Total 6,356 4,050 Less estimated units of inventory, December 1, 2016 200 240 Total units to be purchased 6,156 3,810 Unit price 7 1 Total direct materials to be purchased 43,092 3,810 46,902 4. Prepare a direct labor cost budget for December. Feathered Friends Inc. Direct Labor Cost Budget For the Month Ending December 31, 2016 Fabrication Department Assembly Department Total Hours required for production: Bird house 640 960 Bird feeder 1,200 1,050 Total 1,840 2,010 Hourly rate 16 12 Total direct labor cost 29,440 24,120 53,560 5. Prepare a factory overhead cost budget for December. Feathered Friends Inc. Factory Overhead Cost Budget For the Month Ending December 31, 2016 Indirect factory wages 75,000 Depreciation of plant and equipment 23,000 Power and light 6,000 Insurance and property tax 5,000 Total 109,000 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. Feathered Friends Inc. Cost of Goods Sold Budget For the Month Ending December 31, 2016 Finished goods inventory, December 1, 2016 Direct materials: Direct materials inventory, December 1, 2016 Cost of direct materials available for use Less: Direct materials inventory, December 31, 2016 Cost of direct materials placed in production Direct labor Factory overhead Total manufacturing costs Total work in process during the period Less: Work in process inventory, December 31, 2016 Cost of goods manufactured Cost of finished goods available for sale Less: Finished goods inventory, December 31, 2016 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, 2016 Selling expenses: Sales salaries expense 70,000 Advertising expense 18,000 Telephone expenseselling 550 Travel expenseselling 4,000 Total selling expenses 92,550 Administrative expenses: Office salaries expense 21,000 Depreciation expenseoffice equipment 600 Telephone expenseadministrative 250 Office supplies expense 200 Miscellaneous administrative expense 400 Total administrative expenses 22,450 Total operating expenses 115,000 8. Prepare a budgeted income statement for December. Feathered Friends Inc. Budgeted Income Statement For the Month Ending December 31, 2016 Revenue from sales 370,000 Cost of goods sold 197,680 Gross profit 172,320 Operating expenses: Selling expenses 92,550 Administrative expenses 22,450 Total operating expenses 115,000 Income from operations 50,678 Other income: Interest revenue 200 Other expenses: Interest expense 122 50,756 Income before income tax 57,338 Income tax expense (30% rate) 17,201.40 Net income 40,136.60