Here is a comprehensive example. The Northwest Bat Company manufactures wood baseball bats. Northwests two products are a youth bat, made for children and young teens, and an adult bat, designed for high school and college-age players. Bats are sold to sporting goods stores and all are on account. The youth bat sells for $35; the adult bat sells for $65. The highest sales volume is in the first three months of the year as retailers prepare for the spring baseball season. Northwests balance sheet for December 31, 2018 is below.

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Northwest Bat Company Balance Sheet December 31, 2018 Assets Current Assets: Cash $ 30,000 Accounts Receivable 22,500 Raw Materials Inventory 11,000 Finished Goods Inventory 20,250 Total Current Assets 83,750 Property, Plant, and Equipment: Equipment 125,000 Less: Accumulated Depreciation (50,000) 75,000 Total Assets $ 158,750 Liabilities Current Liabilities: Accounts Payable $ 12,500 Stockholders' Equity Common Stock $ 100,000 Retained Earnings 46,250 Total Stockholders' Equity 146,250 Total Liabilities and Stockholders' Equity $ 158,750 Additional Information a. Budgeted sales are 1,500 youth bats and 3,000 adult bats. b. Finished Goods Inventory on December 31 consists of 500 youth bats at $15 each and 750 adult bats at $17 each. c. Desired ending Finished Goods Inventory is 300 youth bats and 450 adult bats; FIFO inventory costing method is used. d. Direct materials cost is $8 per youth bat and $10 per adult bat. e. Desired ending Raw Materials Inventory is $11,000 (indirect materials are insignificant and not considered for budgeting purposes). f. Each bat requires 0.25 hours of direct labor, direct labor costs average $20 per hour. g. Variable manufacturing overhead is $0.75 per bat. h. Fixed manufacturing overhead includes $1,000 per quarter in depreciation and $2,000 per quarter for other costs, such as insurance and property taxes. i. Fixed selling and administrative expenses include $10,000 per quarter for salaries; $3,000 per quarter for rent: $1,500 per quarter for insurance, and $300 per quarter for depreciation j. Variable selling and administrative expenses include supplies at 1% of sales. All rights reserved. Dr. Robert R. McWhorter -- Managerial Accounting - Chapter 22 7 Requirement 1: Sales Budget Northwest Bat Company Sales Budget For the Quarter Ended March 31, 2019 Youth Adult Additional inform Bate Bats Total for bus. Intro paragraph for sales Budgeted bots to be sold 1,500 3.000 4.500 price per unit. Note Sales price per unit $ 65 the format of Sales Total sales S 195,000 S 247 500 Bet Requirement 2: Production Budget Adult Bats 3,000 Northwest Bat Company Production Budget For the Quarter Ended March 31, 2019 Youth Bats Budgeted bats to be sold 1.500 Plus: Desired bats in ending inventory 300 Total bats needed 1.800 Less: Bats in beginning inventory Budgeted bots to be produced Total 4.500 From Sales Budget 450 5250 3.450 750 Info it be 2.700 Requirement 3. Direct Material Budget Northwest Bat Company Direct Materials Budget For the Quarter Ended March 31, 2019 Youth Adult Total 4.000 From Production Budget 1300 2.700 10 Info 6. 27 0005 Budgeted buts to be produced Direct material cost per unit Direct materials needed for production Plus Desired direct materials in ending watory Total direct materials needed Less Direct in being wory Budgeted purchases of directorials Info 48.400 11.000 from Balance 37400