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 10,000 units in the urban region at a unit price of $53 and 9,000 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 8,000-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/b.) $12.60 B (2 lb.@$4.65/10.) 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 8,000 and 10,000 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 x 2. Production 0 X 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 (5) Material A Material B OX OX OX 0 X OX OX 0 OX OX OX > 4. Direct labor costs $ 0 x 5. Manufacturing overhead costs Total OX $ Fixed Variable Ox $ 0$ OX OX Ox OX Depreciation Factory supplies Supervisory salaries Other Total manufacturing overhead Ox OX $ $ 0 5. Manufacturing overhead costs $ 0$ Depreciation Factory supplies Supervisory salaries Other Total manufacturing overhead Fixed Variable Ox $ OX Ox OX OX Total OX OX 0 x OX OX OX $ 6. Selling and administrative expenses Fixed Variable Total $ Ox $ OX OS OX OX OX OX OX OX OX $ 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 $ Ox $ OX Ox OS OX OX $ $ OX OX OX OX OX 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 $ OX Cost of Goods Sold: Beginning Inventory - Finished Goods $ Material: Beginning Inventory - Material $ Material Purchases Material Available OX Ending Inventory - Material OX Direct Material OX Direct Labor Ox Manufacturing Overhead OX Total Manufacturing Cost OX Cost of Goods Available for Sale OX Ending Inventory - Finished Goods Ox Cost of Goods Sold OX Gross Profit Operating Expenses: Selling Expenses Ox Administrative Expenses Total Operating Expenses Income before Income Taxes Income Tax Expense OX Net Income $ OX
