PART 1

Budgeted Income Statement and Supporting Budgets

The budget director of Feathered Friends Inc., 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 December 2016:

Estimated sales for December:

Bird house	3,200 units at $50 per unit
Bird feeder	3,000 units at $70 per unit

Estimated inventories at December 1:

Direct materials:
Wood	200 ft.
Plastic	240 lbs.
Finished products:
Bird house	320 units at $27 per unit
Bird feeder	270 units at $40 per unit

Desired inventories at December 31:

Direct materials:
Wood	220 ft.
Plastic	200 lbs.
Finished products:
Bird house	290 units at $27 per unit
Bird feeder	250 units at $41 per unit

Direct materials used in production:

In manufacture of Bird House:
Wood	0.80 ft. per unit of product
Plastic	0.50 lb. per unit of product
In manufacture of Bird Feeder:
Wood	1.20 ft. per unit of product
Plastic	0.75 lb. per unit of product

Anticipated cost of purchases and beginning and ending inventory of direct materials:

Wood	$7.00 per ft.
Plastic	$1.00 per lb.

Direct labor requirements:

Bird House:
Fabrication Department	0.20 hr. at $16 per hr.
Assembly Department	0.30 hr. at $12 per hr.
Bird Feeder:
Fabrication Department	0.40 hr. at $16 per hr.
Assembly Department	0.35 hr. at $12 per hr.

Estimated factory overhead costs for December:

Indirect factory wages	$75,000
Depreciation of plant and equipment	23,000
Power and light	$6,000
Insurance and property tax	5,000

Estimated operating expenses for December:

Sales salaries expense	$70,000
Advertising expense	18,000
Office salaries expense	21,000
Depreciation expenseoffice equipment	600
Telephone expenseselling	550
Telephone expenseadministrative	250
Travel expenseselling	4,000
Office supplies expense	200
Miscellaneous administrative expense	400

Estimated other income and expense for December:

Interest revenue	$200
Interest expense	122

Estimated tax rate: 30%

PART 2

Cash Budget

The controller of Dash Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

	March		April		May
Sales	$98,000		$120,000		$168,000
Manufacturing costs	41,000		52,000		60,000
Selling and administrative expenses	28,000		32,000		37,000
Capital expenditures	_		_		40,000

The company expects to sell about 12% of its merchandise for cash. Of sales on account, 65% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $6,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 85% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of March 1 include cash of $37,000, marketable securities of $53,000, and accounts receivable of $113,300 ($86,000 from February sales and $27,300 from January sales). Sales on account for January and February were $78,000 and $86,000, respectively. Current liabilities as of March 1 include a $49,000, 12%, 90-day note payable due May 20 and $6,000 of accounts payable incurred in February for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $2,900 in dividends will be received in March. An estimated income tax payment of $14,000 will be made in April. Dash Shoes' regular quarterly dividend of $6,000 is expected to be declared in April and paid in May. Management desires to maintain a minimum cash balance of $29,000.

Required:

1. Prepare a monthly cash budget and supporting schedules for March, April, and May. Input all amounts as positive values except overall cash decrease and deficiency which should be indicated with a minus sign. Assume 360 days per year for interest calculations.

PART 3

Budgeted Income Statement and Balance Sheet

As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 2017, the following tentative trial balance as of December 31, 2016, is prepared by the Accounting Department of Webster Publishing Co.:

Cash	$118,800
Accounts Receivable	222,200
Finished Goods	46,700
Work in Process	31,100
Materials	51,100
Prepaid Expenses	3,800
Plant and Equipment	573,800
Accumulated DepreciationPlant and Equipment			$246,700
Accounts Payable			195,300
Common Stock, $10 par			300,000
Retained Earnings			305,500
	$1,047,500		$1,047,500

Factory output and sales for 2017 are expected to total 28,000 units of product, which are to be sold at $100 per unit. The quantities and costs of the inventories at December 31, 2017, are expected to remain unchanged from the balances at the beginning of the year.

Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:

	Estimated Costs and Expenses
	Fixed (Total for Year)		Variable (Per Unit Sold)
Cost of goods manufactured and sold:
Direct materials	_		$25
Direct labor	_		8
Factory overhead:
Depreciation of plant and equipment	$28,000		_
Other factory overhead	8,700		4.5
Selling expenses:
Sales salaries and commissions	100,500		12.5
Advertising	84,000		_
Miscellaneous selling expense	7,300		2
Administrative expenses:
Office and officers salaries	66,100		6.5
Supplies	3,400		1
Miscellaneous administrative expense	1,800		1.5

Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $237,700 on 2017 taxable income will be paid during 2017. Regular quarterly cash dividends of $1 per share are expected to be declared and paid in March, June, September, and December on 30,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $155,000 cash in May.

Required:

Prepare a budgeted income statement for 2017.

Prepare a budgeted balance sheet as of December 31, 2017.

Required: 1. Prepare a sales budget for December. Feathered Friends Inc. Sales Budget For the Month Ending December 31, 2016 Unit Selling Price Unit Sales Total Sales Volume Bird house Bird feeder Total revenue from sales 2. Prepare a production budget for December. Feathered Friends Inc. Production Budget For the Month Ending December 31, 2016 Units Bird House Bird Feeder Expected units to be sold Plus desired inventory, December 31, 2016 Total Less estimated inventory, December 1, 2016 Total units to be produced