Budgeting for Sales, Production, Direct Materials, Direct Labor, and Manufacturing Overhead. Sports Bars, Inc., produces energy bars and sells them by the case (1 unit = 1 case). Information to be used for the operating budget this coming year follows:

Average sales price for each case is estimated to be $25. Unit sales for this coming year, ending December 31, are expected to be as follows:

First quarter	80,000
Second quarter	84,000
Third quarter	88,000
Fourth quarter	97,000

Finished goods inventory is maintained at a level equal to 15 percent of the next quarters sales. Finished goods inventory at the end of the fourth quarter budget period is estimated to be 13,000 units.

Each unit of product requires 5 pounds of direct materials, at a cost of $3 per pound. Management prefers to maintain ending raw materials inventory equal to 10 percent of next quarters materials needed in production. Raw materials inventory at the end of the fourth quarter budget period is estimated to be 43,000 pounds.

Each unit of product requires 0.10 direct labor hours at a cost of $14 per hour.

Variable manufacturing overhead costs are

Indirect materials	$0.20 per unit
Indirect labor	$0.15 per unit
Other	$0.10 per unit

Fixed manufacturing overhead costs per quarter are

Salaries	$80,000
Other	$70,000
Depreciation	$55,625

Required:

Prepare a sales budget using the format shown in Figure 9.3 Sales Budget for Jerrys Ice Cream.

Prepare a production budget using the format shown in Figure 9.4 Production Budget for Jerrys Ice Cream.

Prepare a direct materials purchases budget using the format shown in Figure 9.5 Direct Materials Purchases Budget for Jerrys Ice Cream.

Prepare a direct labor budget using the format shown in Figure 9.6 Direct Labor Budget for Jerrys Ice Cream.

Prepare a manufacturing overhead budget using the format shown in Figure 9.7 Manufacturing Overhead Budget for Jerrys Ice Cream. Round to the nearest dollar.

As the production manager, what concerns, if any, do you have about production requirements for each of the four quarters?

Selling and Administrative Budget and Budgeted Income Statement. (The previous problem must be completed before working this problem.) Sports Bars, Inc., produces energy bars. Management estimates all selling and administrative costs are fixed. Quarterly selling and administrative cost estimates for the coming year follow.

Salaries	$170,000
Rent	$ 65,000
Advertising	$120,000
Depreciation	$ 75,000
Other	$ 36,000

Required:

Use the information presented previously to prepare a selling and administrative budget. Refer to the format shown in Figure 9.8 Selling and Administrative Budget for Jerrys Ice Cream.

Use the information from the previous problem and from requirement a of this problem to prepare a budgeted income statement. Refer to the format shown in Figure 9.9 Budgeted Income Statement for Jerrys Ice Cream.

How will management use the information presented in the budgeted income statement?