Multiperiod budgeted income statement and supporting budgets

Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year:

a. Estimated sales at $125 per unit:

Month	Sales
January	25,000 units
February	30,000 units
March	45,000 units
April	50,000 units

b. Estimated finished goods inventories:

Month	Finished Goods Inventory
January 1	2,000 units
January 31	10% of next months sales
February 28	10% of next months sales
March 31	10% of next months sales

c. Work in process inventories are estimated to be insignificant (zero).

d. Estimated direct materials inventories:

Month	Direct Materials Inventory
January 1	1,000 lbs.
January 31	1,500 lbs.
February 28	2,000 lbs.
March 31	2,500 lbs.

e. Manufacturing costs:

Line Item Description	Per Unit
Direct materials (0.8 lb. per unit $15 per lb.)	$ 12
Direct labor (2.5 hrs. per unit $24 per hr.)	60
Variable factory overhead ($1.20 per direct labor hour)	3
Fixed factory overhead ($200,000 per month, allocated using 40,000 units)	5
Total per-unit manufacturing costs	$80

f. Selling expenses:

Line Item Description	Amount
Variable selling expenses	$4 per unit
Fixed selling expenses	$150,000
Administrative expenses (all fixed costs)	$400,000

2. Prepare a production budget for the first quarter. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Line Item Description	January	February	March	First Quarter
Estimated units soldEstimated units producedEstimated ending inventoryEstimated beginning inventorySelling price per unitEstimated units sold
Desired ending inventoryDesired beginning inventoryEstimated ending inventoryEstimated beginning inventorySelling price per unitDesired ending inventory
Total units available for sale
Less estimated ending inventoryLess estimated beginning inventoryAdd estimated ending inventoryAdd estimated beginning inventorySelling price per unitLess estimated beginning inventory
Total units to be produced

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3. Prepare a direct materials purchases budget for the first quarter. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Line Item Description	January	February	March	First Quarter
Units to be produced
Materials required per unit
Materials required for production
Desired ending inventoryDesired beginning inventoryEstimated beginning inventoryEstimated ending inventorySelling price per unitDesired ending inventory
Total materials available for use
Less estimated ending inventoryLess estimated beginning inventoryAdd estimated ending inventoryAdd estimated beginning inventorySelling price per unitLess estimated beginning inventory
Total materials to be purchased
Cost per pound
Cost of direct materials to be purchased

4. Prepare a direct labor cost budget for the first quarter.

Line Item Description	January	February	March	First Quarter
Units to be producedDirect labor required per unitDirect labor hours required for productionDirect labor hourly rateDirect labor costUnits to be produced	Units to be produced	Units to be produced	Units to be produced	Units to be produced
Direct labor required per unitDirect labor hours required for productionDirect labor hourly rateDirect labor costEstimated units soldDirect labor required per unit	xDirect labor required per unithrs.	xDirect labor required per unithrs.	xDirect labor required per unithrs.	xDirect labor required per unithrs.
Direct labor hours required for productionDirect labor hourly rateDirect labor costEstimated units soldSelling price per unitDirect labor hours required for production	Direct labor hours required for productionhrs.	Direct labor hours required for productionhrs.	Direct labor hours required for productionhrs.	Direct labor hours required for productionhrs.
Desired ending inventoryDirect labor hourly rateDirect labor costEstimated units soldSelling price per unitDirect labor hourly rate	x$Direct labor hourly rate	x$Direct labor hourly rate	x$Direct labor hourly rate	x$Direct labor hourly rate
Desired ending inventoryDesired beginning inventoryDirect labor costEstimated units soldSelling price per unitDirect labor cost	$Direct labor cost	$Direct labor cost	$Direct labor cost	$Direct labor cost

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Remember to take into account hours required for production, hourly rate and hours per unit when calculating direct labor cost.

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5. Prepare a factory overhead cost budget for the first quarter.

Line Item Description	January	February	March	First Quarter
Variable factory overhead:
Budgeted direct labor hoursBudgeted variable factory overheadBudgeted fixed factory overheadDirect labor required per unitVariable factory overhead rateBudgeted direct labor hours
Budgeted variable factory overheadBudgeted fixed factory overheadDirect labor required per unitDirect labor costVariable factory overhead rateVariable factory overhead rate
Budgeted variable factory overheadBudgeted fixed factory overheadDirect labor required per unitDirect labor costDirect labor hourly rateBudgeted variable factory overhead
Fixed factory overhead:
Budgeted fixed factory overheadDirect labor required per unitDirect labor costDirect labor hourly rateDirect labor hoursBudgeted fixed factory overhead
Total factory overhead cost