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 $7,000$ units in the urban region at a unit price of $$53$ and $6,000$ units in the rural region at $$48$ each. Because the sales manager expects the product to catch on$,$ he has asked for production sufficient to generate a $5,000-$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 $(4$ 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 $5,000$ and $7,000$ 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 $1$

$0$

$2.$ Production

Answer $2$

$0$

units

$3.$ Material purchase cost

Material A Material B

Total pounds $($lbs$.)$ required for production Answer $3$

$0$

Answer $4$

$0$

Desired ending materials inventory Answer $5$

$0$

Answer $6$

$0$

Total pounds to be available Answer $7$

$0$

Answer $8$

$0$

Beginning materials inventory Answer $9$

$0$

Answer $10$

$0$

Total material to be purchased $($lbs$.)$ Answer $11$

$0$

Answer $12$

$0$

Total material purchases $($$$)$ Answer $13$

$0$

Answer $14$

$0$

$4.$ Direct labor costs

$Answer $15$

$0$

$5.$ Manufacturing overhead costs

Fixed Variable Total

Depreciation Answer $16$

$0$

Answer $17$

$0$

Answer $18$

$0$

Factory supplies Answer $19$

$0$

Answer $20$

$0$

Answer $21$

$0$

Supervisory salaries Answer $22$

$0$

Answer $23$

$0$

Answer $24$

$0$

Other Answer $25$

$0$

Answer $26$

$0$

Answer $27$

$0$

Total manufacturing overhead Answer $28$

$0$

$6.$ Selling and administrative expenses

Fixed Variable Total

Selling expenses:

Advertising Answer $29$

$0$

Answer $30$

$0$

Answer $31$

$0$

Sales salaries and commissions Answer $32$

$0$

Answer $33$

$0$

Answer $34$

$0$

Other Answer $35$

$0$

Answer $36$

$0$

Answer $37$

$0$

Total selling expenses Answer $38$

$0$

Administrative expenses:

Office salaries Answer $39$

$0$

Answer $40$

$0$

Answer $41$

$0$

Supplies Answer $42$

$0$

Answer $43$

$0$

Answer $44$

$0$

Other Answer $45$

$0$

Answer $46$

$0$

Answer $47$

$0$

Total administrative expenses Answer $48$

$0$

Total selling and administrative expenses Answer $49$

$0$

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 $50$

$0$

Cost of Goods Sold:

Beginning Inventory $-$ Finished Goods Answer $51$

$0$

Material:

Beginning Inventory $-$ Material Answer $52$

$0$

Material Purchases Answer $53$

$0$

Material Available Answer $54$

$0$

Ending Inventory $-$ Material Answer $55$

$0$

Direct Material Answer $56$

$0$

Direct Labor Answer $57$

$0$

Manufacturing Overhead Answer $58$

$0$

Total Manufacturing Cost Answer $59$

$0$

Cost of Goods Available for Sale Answer $60$

$0$

Ending Inventory $-$ Finished Goods Answer $61$

$0$

Cost of Goods Sold Answer $62$

$0$

Gross Profit Answer $63$

$0$

Operating Expenses:

Selling Expenses Answer $64$

$0$

Administrative Expenses Answer $65$

$0$

Total Operating Expenses Answer $66$

$0$

Income before Income Taxes Answer $67$

$0$

Income Tax Expense Answer $68$

$0$

Net Income Answer $69$

$0$