The Bottled Water Company has been bottling and selling water since 1940. Bob Drink, the current owner of The Bottled Water Company, would like to know how a new product would affect the companys net income in the coming year. The Bottled Water Company Budget Committee provided the footnotes at the bottom of a budget. Your task as my Managerial Accounting Department team members: compile Master Budget (Operating Budgets), a Budgeted Income Statement and recommend whether the company should produce the new product. Calculate individual budgets and create income statement and at the end give the recommendation. It is the master budget project. THE BOTTLED WATER COMPANY SALES BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Quarter 1 2 3 4 Year Sales in Units 40,000 80,000 27,000 28,000 175,000 X Selling Price/Unit x $1 x $1 x $1 x $1 x $1 Total Sales 40,000 80,000 27,000 28,000 175,000 THE BOTTLED WATER COMPANY PRODUCTION BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Quarter 1 2 3 4 Year Sales in Units 40,000 Plus Desired Units of Ending Finished Goods * 3,000 6,000 6,000 Desired Total Units 43,000 Less Desired Units of Beginning Finished Goods + 4,000 4,000 Total Production Units 39,000 FOOTNOTE: *Desired units of ending finished goods inventory = 10% of next quarters budgeted sales. +Desired units of beginning finished goods inventory = previous quarters desired units of ending finished goods inventory THE BOTTLED WATER COMPANY DIRECT MATERIALS PURCHASE BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Quarter 1 2 3 4 Year Total Production Units x 20 Ounces Per Unit 39,000 x 20 Total Production Needs in Ounces 780,000 Plus Desired Ounces of Ending Direct Materials Inventory* 128,000 240,000 240,000 Less Desired Ounces of Beginning Direct Materials Inventory+ 156,000 156,000 Total Ounces of Direct Materials to be Purchased 752,000 x $.01 Total Cost of Direct Materials Purchased $7,520 FOOTNOTE: *Desired ounces of ending direct materials inventory = 20% of next quarters budgeted production needs in ounces +Desired ounces of beginning direct materials inventory = previous quarters desired ounces of ending direct material inventory THE BOTTLED WATER COMPANY DIRECT LABOR BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Quarter 1 2 3 4 Year Total Production Units x Direct Labor Hours Per Unit 39,000 x .001 Total Direct Labor Hours x Direct Labor Cost Per Hour 39 x $8 Total Direct Labor Cost $312 THE BOTTLED WATER COMPANY OVERHEAD BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Quarter 1 2 3 4 Year Variable Overhead Costs Factory Supplies ($.01) $390 Employee Benefits ($.05) 1,950 Inspection ($.01) 390 Maintenance and Repair ($.02) 780 Utilities ($.01) _____390_____ Total Variable Overhead Costs $3,900 Total Fixed Overhead Costs ____1,5000____ Total Overhead Costs $5,400 FootNote: The figures in parentheses are variable costs per unit. THE BOTTLED WATER COMPANY SELLING AND ADMINISTRATIVE EXPENSE BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Quarter 1 2 3 4 Year Variable Selling & Administrative Costs 80000 27000 28000 175000 Delivery Expenses ($.01) $400 Sales Commission ($.02) 800 Accounting ($.01) 400 Other Administrative Expenses ($.01) _____400_____ x.05 x.05 x.05 x.05 Total Variable Selling & Administrative Expenses $2,000 4000 1350 1400 8750 Total Fixed Selling & Administrative Expenses ____5,000____ 5000 5000 5000 20000 Total Selling & Administrative Expenses ____7,000____ 9000 6350 6400 28750 FootNote: The figures in parentheses are variable costs per unit. THE BOTTLED WATER COMPANY COST OF GOODS MANUFACTURED BUDGET FOR YEAR ENDING DECEMBER 31, 2017 Directed Materials Used Direct Materials Inventory, Beginning Purchase Cost of Direct Materials Less Direct Materials Available for Use Cost of Direct Materials Used Direct Labor Costs Overhead Costs Total Manufacturing Costs Work in Process Inventory, Beginning* Less Work in Process Inventory, Ending* Cost of Goods Manufactured Manufactured Cost per Unit = Cost of Goods Manufactured/Units Produced FOOTNOTE: *It is the companys policy to have no units in the process at the end of the year.