Preparing a Comprehensive Budget

Bathworks produces hair and bath products. Bathworks owner would like to have an estimate of the companys net income in the coming year.

In computations, round per unit amounts to two decimal places, when required. Round final answers to the nearest whole number.

Project Bathworkss net income next year by completing the operating budgets and budgeted income statement that follows. Assume that the selling price will remain constant.

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1. Sales Budget:

Bathworks
Sales Budget
For the Year Ended December 31
		Quarter 1		Quarter 2		Quarter 3		Quarter 4		Year
Sales in units		4,000		3,000		5,000		5,000		17,000
Selling price per unit		$ 6		$		$		$		$
Total sales		$ 24,000		$		$		$		$

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2. Production Budget:

Bathworks
Production Budget
For the Year Ended December 31
		Quarter 1		Quarter 2		Quarter 3		Quarter 4		Year
Sales in units		4,000
Plus desired units of ending finished goods inventory (a)		300						600		600
Desired total units		4,300
Less desired units of beginning finished goods inventory (b)		400								400
Total production units		3,900
(a) Desired units of ending finished goods inventory = 10% of next quarter's budgeted sales.
(b) Desired units of beginning finished goods inventory = 10% of current quarters budgeted sales.

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3. Direct Materials Purchases Budget:

Bathworks
Direct Materials Purchases Budget
For the Year Ended December 31
		Quarter 1		Quarter 2		Quarter 3		Quarter 4		Year
Total production units		3,900		3,200		5,000		5,100		17,200
ounces per unit		4		4		4		4		4
Total production needs in ounces		15,600
Plus desired ounces of ending direct materials inventory (a)		2,560						3,600		3,600
		18,160
Less desired ounces of beginning direct materials inventory (b)		3,120								3,120
Total ounces of direct materials to be purchased		15,040