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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

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:

Variable

Fixed

(per unit)

(total)

Manufacturing costs:
Direct materials
A (4 lb. @ $3.15/lb.) $12.60 -
B (2 lb. @ $4.65/lb.) 9.30 -
Direct labor (0.5 hours per unit) 7.50 -
Manufacturing overhead:
Depreciation - $7,650
Factory supplies 0.90 4,500
Supervisory salaries - 28,800
Other 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

$_____

2. Production

_____ units

3. Material purchase cost

Material A Material B
Total pounds (lbs.) required for production Answer Answer
Desired ending materials inventory Answer Answer
Total pounds to be available Answer Answer
Beginning materials inventory Answer Answer
Total material to be purchased (lbs.) Answer Answer
Total material purchases ($) Answer Answer

4. Direct labor costs

$ _____

5. Manufacturing overhead costs

Fixed Variable Total
Depreciation Answer Answer Answer
Factory supplies Answer Answer Answer
Supervisory salaries Answer Answer Answer
Other Answer Answer Answer
Total manufacturing overhead Answer

6. Selling and administrative expenses

Fixed Variable Total
Selling expenses:
Advertising Answer Answer Answer
Sales salaries and commissions Answer Answer Answer
Other Answer Answer Answer
Total selling expenses Answer
Administrative expenses:
Office salaries Answer Answer Answer
Supplies Answer Answer Answer
Other Answer Answer Answer
Total administrative expenses Answer
Total selling and administrative expenses Answer

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, 2016
Sales Answer
Cost of Goods Sold:
Beginning Inventory - Finished Goods Answer
Material:
Beginning Inventory - Material Answer
Material Purchases Answer
Material Available Answer
Ending Inventory - Material Answer
Direct Material Answer
Direct Labor Answer
Manufacturing Overhead Answer
Total Manufacturing Cost Answer
Cost of Goods Available for Sale Answer
Ending Inventory - Finished Goods Answer
Cost of Goods Sold Answer
Gross Profit Answer
Operating Expenses:
Selling Expenses Answer
Administrative Expenses Answer
Total Operating Expenses Answer
Income before Income Taxes Answer
Income Tax Expense Answer
Net Income Answer

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