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Scenario: United Mobile Corporation appeared to be experiencing a good year. Sales in the first quarter were one-third ahead of last year, and the sales
Scenario: | |||
United Mobile Corporation appeared to be experiencing a good year. Sales in the first quarter were one-third ahead of last year, and the sales department predicted that this rate would continue throughout the entire year. The controller asked Megan Casey, a summer accounting intern, to prepare a draft forecast for the year and to analyze the differences from last years results. She based the forecast on actual results obtained in the first quarter plus the expected costs of production to be completed in the remainder of the year. She worked with various department heads (production, sales, and so on) to get the necessary information. The results of these efforts follow: | |||
UNITED MOBILE CORPORATION Expected Account Balances for December 31, Year 2 | |||
Cash | $ 5,280 | ||
Accounts receivable | 352,000 | ||
Inventory (January 1, year 2) | 211,200 | ||
Plant and equipment | 572,000 | ||
Accumulated depreciation | $ 180,400 | ||
Accounts payable | 198,000 | ||
Notes payable (due within one year) | 220,000 | ||
Accrued payables | 102,300 | ||
Common stock | 308,000 | ||
Retained earnings | 476,080 | ||
Sales revenue | 2,640,000 | ||
Other income | 39,600 | ||
Manufacturing costs | |||
Materials | 937,200 | ||
Direct labor | 959,200 | ||
Variable overhead | 572,000 | ||
Depreciation | 22,000 | ||
Other fixed overhead | 34,100 | ||
Marketing | |||
Commissions | 88,000 | ||
Salaries | 70,400 | ||
Promotion and advertising | 198,000 | ||
Administrative | |||
Salaries | 70,400 | ||
Travel | 11,000 | ||
Office costs | 39,600 | ||
Income taxes | |||
Dividends | 22,000 | ||
$4,164,380 | $ 4,164,380.00 | ||
UNITED MOBILE CORPORATION Statement of Income and Retained EarningsFor the Budget Year Ended December 31, Year 1 | |||
Revenues | |||
Sales revenue | $1,980,000 | ||
Other income | 66,000 | $1,860,000 | |
Expenses | |||
Cost of goods sold | |||
Materials | $ 580,800 | ||
Direct labor | 594,000 | ||
Variable overhead | 356,400 | ||
Fixed overhead | 52,800 | ||
$1,584,000 | |||
Beginning inventory | 211,200 | ||
$1,795,200 | |||
Ending inventory | 211,200 | $1,584,000 | |
Selling | |||
Salaries | $ 59,400 | ||
Commissions | 66,000 | ||
Promotion and advertising | 138,600 | 264,000 | |
General and administrative | |||
Salaries | $ 61,600 | ||
Travel | 8,800 | ||
Office costs | 35,200 | 105,600 | |
Income taxes | 36,960 | ||
1,990,560 | |||
Operating profit | 55,440 | ||
Beginning retained earnings | 442,640 | ||
Subtotal | $ 498,080 | ||
Less dividends | 22,000 | ||
Ending retained earnings | $ 476,080 | ||
REQUIRED | |||
Prepared a budgeted income statement and balance sheet. |
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