Preparation of Individual Budgets

During the first calendar quarter of $2016,$ Williams Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be $9,000$ units in the urban region at a unit price of $$65$ and $7,000$ units in the rural region at $$55$ each. Because the sales manager expects the product to catch on$,$ she has asked for production sufficient to generate a $5,000-$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 $(2$ lb$.$ @ $$2\mathrm{.}50/$lb$.)$ $$5\mathrm{.}00-$

B $(5$ lb$.$ @ $$1\mathrm{.}40/$lb$.)7\mathrm{.}00-$

Direct labor $(2$ hours per unit$)10\mathrm{.}00-$

Manufacturing overhead

Depreciation $-$ $$22,500$

Factory supplies $0\mathrm{.}552,500$

Supervisory salaries $-16,250$

Other $0\mathrm{.}659,200$

Operating expenses:

Selling:

Advertising $-12,500$

Sales salaries& commissions$*1\mathrm{.}2520,000$

Other$*0\mathrm{.}504,200$

Administrative

Office salaries $-15,000$

Supplies $0\mathrm{.}401,200$

Other $0\mathrm{.}255,000$

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

a$.$ Assuming that the desired ending inventories of materials A and B are $5,000$ and $21,000$ 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

$970000$

$2.$ Production

Answer

$21000$

units

$3.$ Material purchases cost

Material A Material B

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

$42000$

Answer

$105000$

Desired ending materials inventory Answer

$5000$

Answer

$21000$

Total pounds to be available Answer

$47000$

Answer

$126000$

Beginning materials inventory Answer

$0$

Answer

$0$

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

$47000$

Answer

$126000$

Total material purchases $($$$)$ Answer

$117500$

Answer

$167400$

$4.$ Direct labor costs

$Answer

$210000$

$5.$ Manufacturing overhead costs

Fixed Variable Total

Depreciation Answer

$22500$

Answer

$0$

Answer

$22500$

Factory supplies Answer

$2500$

Answer

$11550$

Answer

$14050$

Supervisory salaries Answer

$16250$

Answer

$0$

Answer

$16250$

Other Answer

$9200$

Answer

$13650$

Answer

$22850$

Total manufacturing overhead Answer

$75650$

$6.$ Selling and administrative expenses

Fixed Variable Total

Selling expenses:

Advertising Answer

$12500$

Answer

$0$

Answer

$12500$

Sales salaries and commissions Answer

$20000$

Answer

$20000$

Answer

$40000$

Other Answer

$4200$

Answer

$8000$

Answer

$12200$

Total selling expenses Answer

$64700$

Administrative expenses:

Office salaries Answer

$15000$

Answer

$0$

Answer

$15000$

Supplies Answer

$1200$

Answer

$8400$

Answer

$9600$

Other Answer

$5000$

Answer

$5250$

Answer

$10250$

Total administrative expenses Answer

$34850$

Total selling and administrative expenses Answer

$99,550$

b$.$ Using data generated in requirement $($a$),$ prepare a budgeted income statement for the calendar quarter. Assume an overall effective income tax rate of $35\%.$

Round answers to the nearest whole number.

Do not use negative signs with your answers.

Williams Corporation

Budgeted Income Statement

For the Quarter Ended March $31,2016$

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

$0$