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.