PR 21-3A 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:

A.Estimated sales for December:

A.

Bird house ................... 3,200 units at $50 per unit

Bird feeder................... 3,000 units at $70 per unit

B.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

C.Desired inventories at December 31:

Direct materials:

Wood ........ 220 ft.

Plastic ......200 lbs.

D.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:

Bird house ........ 1.20 ft. per unit of product

Bird feeder....... 250 units at $41 per unit

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

Wood ............ $7.00 per ft.

Plastic........... $1.00 per lb.

F.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.

G.Estimated factory overhead costs for December:

Indirect factory wages $75,000

Depreciation of plant and equipment23,000

Power and light6,000

Insurance and property tax 5,000

H.Estimated operating expenses for December:

Sales salaries expense $70,000

Advertising expense 18,000

Office salaries expense 21,000

Depreciation expenseoffice equipment600

Telephone expenseselling 550

Telephone expenseadministrative250

Travel expenseselling 4,000

Office supplies expense 200

Miscellaneous administrative expense 400

I. Estimated other income and expense for December:

Interest revenue $200

Interest expense 122

J. Estimated tax rate: 30%

Instructions

1. Prepare a sales budget for December.

2. Prepare a production budget for December.

3. Prepare a direct materials purchases budget for December.

4. Prepare a direct labor cost budget for December.

5. Prepare a factory overhead cost budget for December.

6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be $29,000, and work in process at the end of December is estimated to be $35,400.

7. Prepare a selling and administrative expenses budget for December.

8. Prepare a budgeted income statement for December