Tom Brady is preparing the 2023 budget for one of her Trademark jetskis. Extensive meetings with members of the sales department and executive management have resulted in the following unit sales projections for 2023.

For quarter 1 the projected sales are 1000 jetskis and each quarter the number increases by 10% from the previous quarter. They expect to sell each ship for $100 in quarter one and a 10% increase in each quarter after that.

Elephants policy is to have finished goods inventory in a quarter equal to 20% of the next quarters anticipated Sales. Preliminary Sales projections for 2024 are 400 jetskis for the first quarter and 400 jetskis for the second quarter. Ending finished goods in December 2022 are 300 jetskis.

Production of each jetski requires 50 pounds of material. Company policy is that the ending inventory for material should be 25% of the amount needed in production for the next quarter. Assume that the ending inventory of material in December 2023 is 12000 pounds and for the first quarter in 2024 is 14000 pounds. The material used in the production of the jetski cost $1.50 per pound.

Production of a single jetski requires 3 hours of work by employees. Employees are paid $10 per hour. Selling and administrative are expected to be $35 per unit sold plus $5500 fixed costs per quarter. Manufacturing overhead is assigned at 150% of labour costs and additional fixed costs of $400 for depreciation and $200 for maintenance costs each quarter. Interest per quarter is expected to be $200 and taxes $300 per quarter. Overheads are measured by direct labour hour.

Requirements

Prepare the selling and administrative budget for each quarter and for the year 2023 and prepare a Budgeted Income Statement for the year 2023.