Preparation of Individual Budgets During the first calendar quarter of 2016, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 5,000 units in the urban region at a unit price of $53 and 4,000 units in the rural region at $48 each. Because the sales manager expects the product to catch on, he has asked for production sufficient to generate a 3,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses: 7.50 Other Variable Fixed (per unit) (total) Manufacturing costs: Direct materials A (4 lb. @ $3.15/lb.) $12.60 B (2 lb. @ $4.65/1b.) 9.30 Direct labor (0.5 hours per unit) Manufacturing overhead: Depreciation - $7.650 Factory supplies 0.90 4,500 Supervisory salaries - 28.800 0.75 22,950 Operating expenses Selling: Advertising - 22,500 Sales salaries & commissions* 1.50 15,000 Other 0.90 3,000 Administrative: Office salaries - 2,700 Supplies 0.15 1,050 Other 0.08 1,950 *Varies per unit sold, not per unit produced. a. Assuming that the desired ending inventories of materials A and B are 3,000 and 5,000 pounds, respectively, and that work-in-process inventories are immaterial, prepare budgets for the calendar quarter in which the new product will be introduced for each of the following operating factors: Do not use negative signs with any of your answers below. 1. Total sales $ 457,000 2. Production 12,000 units 3. Material purchase cost Total pounds (lbs.) required for production Desired ending materials inventory Total pounds to be available Beginning materials inventory Total material to be purchased (lbs.) Total material purchases ($) Material A Material B 36,000 X 14,000 x 3,000 5,000 66,000 x 36,000 x 0 0 0x 0x $ Ox $ OX 4. Direct labor costs $ 90,000 5. Mamutacturing werred costs $ Depreciation Factory supplies Supervisory salaries Other Total manufacturing overhead Fixed 7,650 4,500 28,800 22,950 Variable $ 0 405 x 0 0.75 x Total 7,650 4,500.9 x 28,800 6. Selling and administrative expenses Fixed Variable Total $ $ $ 22,500 15,000 3,000 0 13,500 8,100 22,500 28,500 11,100 62,100 $ Selling expenses Advertising Sales salaries and commissions Other Total selling expenses Administrative expenses: Office salaries Supplies Other Total administrative expenses Total selling and administrative expenses $ $ 2,700 1,050 1,950 0 1,800 960 2,700 2,850 2,910 8,460 70,560 $ $ b. Using data generated in requirement (a), prepare a budgeted income statement for the calendar quarter. Assume an overall effective income tax rate of 30%. Round answers to the nearest whole number. Do not use negative signs with your answers. $ 457,000 Clinton Corporation Budgeted Income Statement For the Quarter Ended March 31, 2016 Sales Cost of Goods Sold: Beginning Inventory - Finished Goods Material: $ Beginning Inventory - Material 0 Material Purchases OX Material Available OX Ending Inventory - Material OX Direct Material OX Direct Labor 90,000 Manufacturing Overhead OX Total Manufacturing Cost Cost of Goods Available for Sale Ending Inventory - Finished Goods Cost of Goods Sold Gross Profit Operating Expenses: Selling Expenses 62.100 Administrative Expenses 8,460 Total Operating Expenses Income before Income Taxes Income Tax Expense Net Income
