Preparation of Individual Budgets

During the first calendar quarter of the year, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be $6,000$ units in the urban region at a unit price of $$53$ and $5,000$ units in the rural region at $$48$ each. Because the sales manager expects the product to catch on$,$ he has asked for production sufficient to generate a $4,000-$unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses:

Variable

Fixed

$($per unit$)$

$($total$)$

Manufacturing costs:

Direct materials

A $(4$ lb$.$ @ $$3\mathrm{.}15/$lb$.)$ $$12\mathrm{.}60-$

B $(2$ lb$.$ @ $$4\mathrm{.}65/$lb$.)9\mathrm{.}30-$

Direct labor $(0\mathrm{.}5$ hours per unit$)7\mathrm{.}50-$

Manufacturing overhead:

Depreciation $-$ $$7,650$

Factory supplies $0\mathrm{.}904,500$

Supervisory salaries $-28,800$

Other $0\mathrm{.}7522,950$

Operating expenses:

Selling:

Advertising $-22,500$

Sales salaries& commissions$*1\mathrm{.}5015,000$

Other$*0\mathrm{.}903,000$

Administrative:

Office salaries $-2,700$

Supplies $0\mathrm{.}151,050$

Other $0\mathrm{.}081,950$

$*$Varies per unit sold, not per unit produced.

a$.$ Assuming that the desired ending inventories of materials A and B are $4,000$ and $6,000$ 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

$Answer

$558,000$

$2.$ Production

Answer

$15,000$

units

$3.$ Material purchase cost

Material A Material B

Total pounds $($lbs$.)$ required for production Answer

$0$

Answer

$0$

Desired ending materials inventory Answer

$0$

Answer

$0$

Total pounds to be available Answer

$0$

Answer

$0$

Beginning materials inventory Answer

$0$

Answer

$0$

Total material to be purchased $($lbs$.)$ Answer

$0$

Answer

$0$

Total material purchases $($$$)$ Answer

$0$

Answer

$0$

$4.$ Direct labor costs

$Answer

$112,500$

$5.$ Manufacturing overhead costs

Fixed Variable Total

Depreciation Answer

$0$

Answer

$0$

Answer

$0$

Factory supplies Answer

$0$

Answer

$0$

Answer

$0$

Supervisory salaries Answer

$0$

Answer

$0$

Answer

$0$

Other Answer

$0$

Answer

$0$

Answer

$0$

Total manufacturing overhead Answer

$0$

$6.$ Selling and administrative expenses

Fixed Variable Total

Selling expenses:

Advertising Answer

$0$

Answer

$0$

Answer

$0$

Sales salaries and commissions Answer

$0$

Answer

$0$

Answer

$0$

Other Answer

$0$

Answer

$0$

Answer

$0$

Total selling expenses Answer

$0$

Administrative expenses:

Office salaries Answer

$0$

Answer

$0$

Answer

$0$

Supplies Answer

$0$

Answer

$0$

Answer

$0$

Other Answer

$0$

Answer

$0$

Answer

$0$

Total administrative expenses Answer

$0$

Total selling and administrative expenses Answer

$0$

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.

Clinton Corporation

Budgeted Income Statement

For the Quarter Ended March $31$

Sales Answer

$0$

Cost of Goods Sold:

Beginning Inventory $-$ Finished Goods Answer

$0$

Material:

Beginning Inventory $-$ Material Answer

$0$

Material Purchases Answer

$0$

Material Available Answer

$0$

Ending Inventory $-$ Material Answer

$0$

Direct Material Answer

$0$

Direct Labor Answer

$0$

Manufacturing Overhead Answer

$0$

Total Manufacturing Cost Answer

$0$

Cost of Goods Available for Sale Answer

$0$

Ending Inventory $-$ Finished Goods Answer

$0$

Cost of Goods Sold Answer

$0$

Gross Profit Answer

$0$

Operating Expenses:

Selling Expenses Answer

$0$

Administrative Expenses Answer

$0$

Total Operating Expenses Answer

$0$

Income before Income Taxes Answer

$0$

Income Tax Expense Answer

$0$

Net Income Answer

$0$