Sandy McEwan is an accountant for mount Dandenong Bikes, a manufacturer of sturdy mountair bikes for intermediate bikers. The entity's managers are forecasting an increase in sales because o the success of their current advertising campaign. They ask Sandy to create a master budget for the upcoming year, given the forecasted sales increase.

To gather information needed for the budget, Sandy first assesses relevant data about revenues inventories and production costs from last period's accounting records. Next, he obtains information from every department and meets with top management to identify changes in sales volume and prices, production processes, manufacturing costs, and support department costs.

Beginning direct materials inventories and costs per units are as follows:

• Wheels and tyres $20,000 @ $20 per unit

• Components 70,000 @ $70 per unit

• Frames 50,000 @ $50 per unit

Managers inform Sandy that they want ending inventories to be as follows. Prices are stable:

• Wheels and tyres $25,000 @ $20 per unit

• Components 87,500 @ $70 per unit

• Frames 62,500 @ $50 per unit

Sandy next gathers the necessary direct labour data. He finds the following:

Direct Labour Hours Cost per hour

Assembly 1.5 $25

Testing 0.15 $15

In addition to the direct costs of production, overhead costs need to be included in the budgeting process. Sandy uses information that he collected from last years operations and updates it with current prices. Sandy expects fixed overhead to be $20,200,000

The cost per unit of variable manufacturing overhead is expected to be as follows:

Variable overhead (cost per unit): Supplies $20.00 Indirect labour $37.50 Maintenance $10.00 Miscellaneous $ 7.50

To conclude his data collecting activities, Sandy evaluates the cost for all of the support departments. In this illustration, the support department costs are all fixed. In other situations, support costs could contain a mixture of fixed and variable costs.

Support Department Fixed Costs Administration $16,478,215 Marketing 9,886,929 Distribution 4,943,465 Customer Service 1,647,821

Sandy then develops the individual operating budgets and then combines this information to prepare the budgeted income statement. The entitys managers to not anticipate any non-operating income statement items, so no additional items must be included in the budgeted income statement except for income taxes at the expected rate of 30%.

Sandy reviews the budgeted income statement information with the entitys controller. The budgets are then presented at a meeting with the CEO on the varying department heads.

Required:

1. Prepare a revenue budget for Mount Dandenong Bikes

2. Prepare a production budget (units) for Mount Dandenong Bikes

3. Prepare a direct materials budget for Mount Dandenong Bikes

4. Prepare a direct labor budget for Mount Dandenong Bikes

5. Prepare a manufacturing overhead budget for Mount Dandenong Bikes

6. Prepare a cost of goods sold budget for Mount Dandenong Bikes

7. Prepare a support department budget for Mount Dandenong Bikes

8. Prepare a budgeted income statement for Mount Dandenong Bikes

9. Please indicate the time you took to complete this task