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Budgeted Income Statement and SupportingBudgets

The budget director of Gold Medal Athletic Co., 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 March 2014:

1. Estimated sales for March:
2. Estimated inventories at March 1:
3. Desired inventories at March 31:
4. Direct materials used in production:
5. Anticipated cost of purchases and beginning and ending inventory of direct materials:
6. Direct labor requirements:
7. Estimated factory overhead costs for March:
8. Estimated operating expenses for March:
9. Estimated other income and expense for March:
10. Estimated tax rate: 30%

Required:

1. Prepare asales budgetfor March. Enter all amounts as positive numbers.

Batting helmet		$			$
Football helmet
Total revenue from sales					$

2. Prepare aproduction budgetfor March. Enter all amounts as positive numbers.

Expected units to be sold
Plus desired inventory, March 31, 2014
Total
Less estimated inventory, March 1, 2014
Total units to be produced

3. Prepare adirect materials purchases budgetfor March. Enter all amounts as positive numbers.

Units required for production:
Batting helmet
Football helmet
Plus desired units of inventory, March 31, 2014
Total
Less estimated units of inventory, March 1, 2014
Total units to be purchased
Unit price	$	$
Total direct materials to be purchased	$	$	$

4. Prepare adirect labor cost budgetfor March. Enter all amounts as positive numbers.

Hours required for production:
Batting helmet
Football helmet
Total
Hourly rate	$	$
Total direct labor cost	$	$	$

5. Prepare afactory overhead cost budgetfor March. Enter all amounts as positive numbers.

Indirect factory wages	$
Depreciation of plant and equipment
Power and light
Insurance and property tax
Total	$

6. Prepare acost of goods sold budgetfor March. Work in process at the beginning of March is estimated to be $15,300, and work in process at the end of March is desired to be $14,800. Enter all amounts as positive numbers.

SelectDirect materials inventory, March 1, 2014Direct materials inventory, March 31, 2014Direct materials purchasesFactory OverheadFinished goods inventory, March 1, 2014Finished goods inventory, March 31, 2014Item 51
SelectDirect materials inventory, March 1, 2014Direct materials inventory, March 31, 2014Direct materials purchasesFactory OverheadWork in process inventory, March 1, 2014Work in process inventory, March 31, 2014Item 53
Direct materials:
SelectDirect materials inventory, March 1, 2014Direct materials inventory, March 31, 2014Finished goods inventory, March 1, 2014Finished goods inventory, March 31, 2014Work in process inventory, March 1, 2014Work in process inventory, March 31, 2014Item 55
SelectDirect laborDirect materials purchasesFactory overheadFinished goods inventory, March 31, 2014Work in process inventory, March 1, 2014Work in process inventory, March 31, 2014Item 57
Cost of direct materials available for use
SelectLess: Direct materials inventory, March 1, 2014Less: Direct materials inventory, March 31, 2014Less: Finished goods inventory, March 1, 2014Less: Finished goods inventory, March 31, 2014Less: Work in process inventory, March 1, 2014Less: Work in process inventory, March 31, 2014Item 60
Cost of direct materials placed in production
SelectDirect laborDirect materials purchasesFinished goods inventory, March 1, 2014Finished goods inventory, March 31, 2014Work in process inventory, March 1, 2014Work in process inventory, March 31, 2014Item 63
SelectDirect materials purchasesFactory overheadFinished goods inventory, March 1, 2014Finished goods inventory, March 31, 2014Work in process inventory, March 1, 2014Work in process inventory, March 31, 2014Item 65
Total manufacturing costs
Total work in process during the period
SelectLess: Direct materials inventory, March 1, 2014Less: Direct materials inventory, March 31, 2014Less: Finished goods inventory, March 1, 2014Less: Finished goods inventory, March 31, 2014Less: Work in process inventory, March 1, 2014Less: Work in process inventory, March 31, 2014Item 69
Cost of goods manufactured
Cost of finished goods available for sale
SelectLess: Direct materials inventory, March 1, 2014Less: Direct materials inventory, March 31, 2014Less: Finished goods inventory, March 1, 2014Less: Finished goods inventory, March 31, 2014Less: Work in process inventory, March 1, 2014Less: Work in process inventory, March 31, 2014Item 73
Cost of goods sold

7. Prepare a selling and administrative expenses budget for March. Enter all amounts as positive numbers.

Selling expenses:
Sales salaries expense
Advertising expense
Telephone expense?selling
Travel expense?selling
Total selling expenses
Administrative expenses:
Office salaries expense
Depreciation expense?office equipment
Telephone expense?administrative
Office supplies expense
Miscellaneous administrative expense
Total administrative expenses
Total operating expenses

8. Prepare a budgeted income statement for March. Enter all amounts as positive numbers.

SelectGross profitIncome before income taxInterest expenseInterest revenueRevenue from salesItem 88
SelectAdministrative expensesCost of goods soldIncome tax expenseInterest expenseSelling expensesItem 90
SelectGross profitInterest revenueNet incomeNet lossRevenue from salesItem 92
Operating expenses:
SelectCost of goods soldInterest revenueNet incomeNet lossSelling expensesItem 94
SelectAdministrative expensesGross profitInterest revenueNet incomeNet lossItem 96
Total operating expenses
Income from operations
Other income:
SelectGross profitInterest expenseInterest revenueNet incomeRevenue from salesItem 100
Other expenses:
SelectCost of goods soldGross profitInterest expenseInterest revenueNet lossItem 102
Income before income tax
SelectCost of goods soldGross profitIncome tax expense (30% rate)Interest revenueNet lossItem 106
Net income

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The direct materials cost budget, the direct labor cost budget, and the factory overhead budget each use the level of production from the production budget to estimate costs.

The cost of goods sold budget combines the budgeted costs from the direct labor, direct materials, and factory overhead budgets with estimated beginning and ending inventory to estimate a total cost of goods sold.

Estimated sales from the sales budget, estimated cost of goods sold from the cost of goods sold budget, and estimated selling and administrative expenses from the selling and administrative expense budget are used to prepare a budgeted income statement.

Learning Objective 4.