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:

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
	Unit Sales Volume	Unit Selling Price	Total Sales
Bird house
Bird feeder
Total revenue from sales

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 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
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		$
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. 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			$
Cost of goods sold
Gross profit			$
Operating expenses:
Selling expenses		$
Administrative expenses
Total operating expenses
Income from operations			$
Other revenue and expense:
Interest revenue		$
Interest expense
Income before income tax			$
Income tax expense
Net income			$

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