Question 1. Exercise 7-8 Budgeted Income Statement [LO7-9]

Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process:

Budgeted unit sales	680
Selling price per unit	$2,060
Cost per unit	$1,680
Variable selling and administrative expenses (per unit)	$50
Fixed selling and administrative expenses (per year)	$200,000
Interest expense for the year	$22,000

Required:

Prepare the companys budgeted income statement using an absorption income statement format.

Question 2.

Exercise 7-9 Budgeted Balance Sheet [LO7-10]

The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year:

	Ending Balances
Cash		?
Accounts receivable	$	9,800
Supplies inventory	$	4,000
Equipment	$	42,500
Accumulated depreciation	$	17,200
Accounts payable	$	3,500
Common stock	$	5,000
Retained earnings		?

The beginning balance of retained earnings was $34,000, net income is budgeted to be $18,100, and dividends are budgeted to be $4,100.

Required:

Prepare the companys budgeted balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

Question 3.

Exercise 7-10 Production and Direct Materials Budgets [LO7-3, LO7-4]

Pearl Products Limited of Shenzhen, China, manufactures and distributes toys throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are required to manufacture each unit of Supermix, one of the companys products. The company is now planning raw materials needs for the third quarter, the quarter in which peak sales of Supermix occur. To keep production and sales moving smoothly, the company has the following inventory requirements:

a.	The finished goods inventory on hand at the end of each month must be equal to 3,000 units of Supermix plus 20% of the next months sales. The finished goods inventory on June 30 is budgeted to be 12,400 units.
b.	The raw materials inventory on hand at the end of each month must be equal to one-half of the following months production needs for raw materials. The raw materials inventory on June 30 is budgeted to be 72,000 cc of solvent H300.
c.	The company maintains no work in process inventories.

A sales budget for Supermix for the last six months of the year follows.

	Budgeted Sales in Units
July	47,000
August	52,000
September	62,000
October	42,000
November	32,000
December	22,000

Required:
1.	Prepare a production budget for Supermix for the months July, August, September, and October.

3.	Prepare a direct materials budget showing the quantity of solvent H300 to be purchased for July, August, and September, and for the quarter in total.