Problem 10-50 Comprehensive Profit Plan [LO 10-4]

Spring Manufacturing Company makes two components identified as C12 and D57. Selected budgetary data for 2019 follow:

	Finished Components
	C12				D57
Requirements for each finished component:
RM 1		10	pounds			8	pounds
RM 2		0				4	pounds
RM 3		2	pounds			1	pound
Direct labor		2	hours			3	hours
Product information:
Sales price	$	180			$	240
Sales (units)		12,000				9,000
Estimated beginning inventory (units)		450				190
Desired ending inventory (units)		300				200

	Direct Materials Information
	RM1				RM2				RM3
Cost per pound	$	2			$	1.50			$	0.50
Estimated beginning inventory in pounds		2,900				2,000				700
Desired ending inventory in pounds		3,800				1,100				1,900

The firm expects the average wage rate to be $25 per hour in 2019. Spring Manufacturing uses direct labor hours to apply overhead. Each year the firm determines the overhead application rate for the year based on budgeted direct labor hours for the year. The firm maintains negligible Work-in-Process Inventory and expects the cost per unit for both beginning and ending inventories of finished products to be identical.

	Factory Overhead Information
Indirect materialsvariable	$	10,000
Miscellaneous supplies and toolsvariable		5,100
Indirect laborvariable		42,000
Supervisionfixed		160,000
Payroll taxes and fringe benefitsvariable		220,000
Maintenance costsfixed		17,000
Maintenance costsvariable		10,040
Depreciationfixed		71,310
Heat, light, and powerfixed		43,450
Heat, light, and powervariable		9,000
Total	$	587,900

	Selling and Administrative Expense Information
Advertising	$	57,000
Sales salaries		220,000
Travel and entertainment		63,000
Depreciationwarehouse		4,800
Office salaries		61,000
Executive salaries		260,000
Supplies		3,700
Depreciationoffice		6,000
Total	$	675,500

The effective income tax rate for the company is 30%.

Required:

1. Prepare the Sales budget for 2019.

2. Prepare the Production budget for 2019.

3. Prepare the Direct materials purchases budget (units and dollars) for 2019.

4. Prepare the Direct labor budget for 2019.

5. Prepare the Factory overhead budget for 2019.

6. Prepare the Cost of goods sold and ending finished goods inventory budgets for 2019.

7. Prepare the Selling and administrative expense budget, broken down into two components: Selling Expenses, and Administrative Expenses for 2019.

8. Prepare the Budgeted income statement, the last item of which is labeled After-tax Operating Income for 2019.