P22-48B Preparing an operating budget-sales, production, direct materials, direct labor, overhead, COGS, and S&A expense budgets The Haney Batting Company manufactures wood baseball bats. Haney's two primary products are a youth bat, designed for children and young teens, and an adult bat, designed for high school and college-aged players. Haney sells the bats to sporting goods stores, and all sales are on account. The youth bat sells for $35; the adult bat sells for $55. Haney's highest sales volume is in the first three months of the year as retailers prepare for the spring baseball season. Haney's balance sheet for December 31, 2016, follows: Current Assets: Cash HANEY BATTING COMPANY Balance Sheet December 31, 2016 Accounts Receivable Raw Materials Inventory Finished Goods Inventory Total Current Assets Property, Plant, and Equipment: Equipment Less: Accumulated Depreciation Total Assets Assets $ 40,000 17,900 9,000 16,450 $ 83,350 140,000 (10,000) 130,000 $213,350 Liabilities Stockholders' Equity Current Liabilities: Accounts Payable Common Stock, no par Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity $ 10,500 $ 140,000 62,850 202,850 $213,350 Other data for Haney Batting Company for the first quarter of 2017: a. Budgeted sales are 1,300 youth bats and 3,100 adult bats. b. Finished Goods Inventory on December 31 consists of 200 youth bats at $11 each and 750 adult bats at $19 each. c. Desired ending Finished Goods Inventory is 250 youth bats and 550 adult bats; FIFO inventory costing method is used. d. Direct materials cost is $13 per youth bat and $15 per adult bat. e. Desired ending Raw Materials Inventory is $9,000 (indirect materials are insignificant and not considered for budgeting purposes). f. Each bat requires 0.3 hours of direct labor; direct labor costs average $32 per hour. g. Variable manufacturing overhead is $0.40 per bat. h. Fixed manufacturing overhead includes $600 per quarter in depreciation and $1,525 per quarter for other costs, such as insurance and property taxes. i. Fixed selling and administrative expenses include $14,000 per quarter for salaries; $2,500 per quarter for rent; $1,900 per quarter for insurance; and $100 per quarter for depreciation. j. Variable selling and administrative expenses include supplies at 1% of sales.