QUESTION 4 Partially correct Mark 49.00 out of 69.00 P Flag question 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 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 $12.60 9.30 7.50 (4 lb. @ $3.15/lb.) B (2 lb. $4.65/lb.) Direct labor (0.5 hours per unit) Manufacturing overhead: Depreciation Factory supplies Supervisory salaries Other -$7,650 0.90 4,500 -28,800 0.75 22,950 Operating expenses: Selling: Advertising Sales salaries & commissions* Other* - 22,500 1.50 15,000 0.90 3,000 Administrative: Office salaries Supplies Other 2,700 0.15 1,050 0.08 ,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 guarter in which the new nroduct will he introduced for each of the following onerating factors 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 $659,000 2. Production 18,000 units 3. Material purchase cost Material A Material B Total pounds (Ibs.) required for production 40,000 X 12,000 Desired ending materials inventory 5,000 7,000 Total pounds to be available 60,000 x 30,000 Beginning materials inventory Total material to be purchased (lbs.) Total material purchases ($) 201,600 X 4. Direct labor costs $135,000 5. Manufacturing overhead costs Fixed Variable Total Depreciation Factory supplies Supervisory salaries 7,650 4,500 28,800 7,650 v' 20,700 28,800 36,450 16,200 Other 22,950 13,500 Total manufacturing overhead 93,600 6. Selling and administrative expenses Fixed Variable Total Selling expenses 22,500 34,500 14,700 Advertising 22,500 Sales salaries and commissions 15,000 19,500 Other 3,000 11,700 Total selling expenses 71,700 Administrative expenses: Office salaries 2,700 2,700 upplies 1,050 2,700 3,750 Other 1,950 1,440 3,390 Total administrative expenses 9,840 Total selling and administrative expenses 81,540 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 659,000 Cost of Goods Sold: Beginning Inventory Finished Goods Material: Beginning Inventory - Material 18,000 Material Purchases 18,000 X Material Available Ending Inventory Material 12,000 Direct Material 18,000 Direct Labor 135,000 Manufacturing Overhead 93,600 Total Manufacturing Cost Cost of Goods Available for Sale Ending Inventory Finished Goods Cost of Goods Sold Gross Profit Operating Expenses: Selling Expenses 71,700 Administrative Expenses 9,840 Total Operating Expenses 81,540 Income before Income Taxes Income Tax Expense Net Income Check
