Cymbal E-Motors is a fast-growing start-up firm that manufactures electric motors for bicycles. The following income statement is available for April: Sales revenue (750 units @ $700 per unit) Less Manufacturing costs Variable costs Depreciation (fixed) Marketing and administrative costs Fixed costs (cash) Depreciation (fixed) Total costs Operating profits Required: Prepare a budgeted income statement for May. Note: Do not round intermediate calculations. Sales volume is expected to increase by 30 percent in May, but the sales price is expected to fall 5 percent. Variable manufacturing costs are expected to increase by 7.5 percent per unit in May. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 15 percent. Sales revenue All revenues and costs at Cymbal are cash transactions, except for depreciation. Cymbal maintains no inventories. Depreciation is fixed and is forecast to remain unchanged in the next six months. Cymbal E-Motors Budgeted Income Statement For the Month of May Manufacturing costs: Depreciation (fixed) Variable costs Total manufacturing costs Gross profit margin $ 525,000 S 49,000 58,800 49,000 S 49,000 S (49,000) 122,000 57,000 $286,800 $ 238,200

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Cymbal E-Motors is a fast-growing start-up firm that manufactures electric motors for bicycles. The following income statement is available for April: Sales volume is expected to increase by 30 percent in May, but the sales price is expected to fall 5 percent. Variable manufacturing costs are expected to increase by 7.5 percent per unit in May. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 15 percent. All revenues and costs at Cymbal are cash transactions, except for depreciation. Cymbal maintains no inventories. Depreciation is fixed and is forecast to remain unchanged in the next six months. Required: Prepare a budgeted income statement for May. Cymbal E-Motors Budgeted Income Statement For the Month of May Sales revenue Manufacturing costs: Depreciation (fixed) 49,000 Variable costs Total manufacturing costs 49.000 Gross profit margin (49.000) Marketing and administrative: Depreciation (xed) 57.000 Fixed costs (cash) 140,300 Total marketing and administrative costs 197.300 Operating profit (246,300 Note: Do not round intermediate calculations.

**Cymbal E-Motors Income Statement Overview**

Cymbal E-Motors is a fast-growing startup firm that manufactures electric motors for bicycles. Below is the income statement for April:

- **Sales Revenue:** $525,000 (750 units at $700 per unit)

**Less Manufacturing Costs:**
- Variable Costs: $58,800
- Depreciation (Fixed): $49,000

**Marketing and Administrative Costs:**
- Fixed Costs (Cash): $122,000
- Depreciation (Fixed): $57,000

**Total Costs:** $286,800

**Operating Profits:** $238,200

### Projections for May

It is expected that:
- Sales volume will increase by 30%.
- Sales price will decrease by 5%.
- Variable manufacturing costs will increase by 7.5% per unit, changing with sales volume.
- Marketing and administrative cash costs will increase by 15%.

All revenues and costs at Cymbal are cash transactions, except for fixed depreciation. Cymbal maintains no inventories, and depreciation is expected to remain unchanged over the next six months.

### Requirement

Prepare a budgeted income statement for May. Note that intermediate calculations should not be rounded.

### Budgeted Income Statement for May (Template)

**Cymbal E-Motors**

**Budgeted Income Statement**

For the Month of May

| Description | Amount |
|-------------|--------|
| **Sales Revenue** | |
| **Manufacturing Costs:** | |
| Depreciation (Fixed) | $49,000 |
| Variable Costs | |
| **Total Manufacturing Costs** | $49,000 |
| **Gross Profit Margin** | $(49,000) |

Note: This table requires adjustments based on updated sales and cost projections for May.

### Sales and Profit Forecast Analysis

The projected data indicates:

- **Sales Volume and Pricing**: Sales volume is expected to increase by 30% in May; however, the sales price is projected to decrease by 5%.
- **Variable Manufacturing Costs**: These costs are anticipated to rise by 7.5% per unit. Additionally, these costs are subject to variability with changes in sales volume. Likewise, marketing and administrative costs are expected to see a 15% increase.
- **Cost Accounting**: All transactions are cash-based except for depreciation. There are no inventories maintained by the company, and the depreciation is fixed for the next six months.

### Budgeted Income Statement for Cymbal E-Motors (May)

| **Category** | **Amount** |
|------------------------------------------|-----------|
| **Sales revenue** | |
| **Manufacturing costs:** | |
| - Depreciation (fixed) | $49,000 |
| - Variable costs | |
| **Total manufacturing costs** | $49,000 |
| **Gross profit margin** | $(49,000) |
| **Marketing and administrative:** | |
| - Depreciation (fixed) | $57,000 |
| - Fixed costs (cash) | $140,300 |
| **Total marketing and administrative costs** | $197,300 |
| **Operating profit** | $(246,300)|

This table illustrates the financial expectations for Cymbal E-Motors in May, focusing on sales, manufacturing, and administrative costs. The projected operating profit indicates a negative balance, highlighting areas for potential financial improvement or strategic adjustments.

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