Prepare a budgeted income statement for January.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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The budget director of Birds of a Feather Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January:
- Estimated sales for January:
Birdhouse 6,000 units at $55 per unit Bird feeder 4,500 units at $75 per unit - Estimated inventories at January 1:
Direct materials: Wood 220 ft. Plastic 250 lb. Finished products: Birdhouse 300 units at $23 per unit Bird feeder 240 units at $34 per unit - Desired inventories at January 31:
Direct materials: Wood 180 ft. Plastic 210 lb. Finished products: Birdhouse 340 units at $23 per unit Bird feeder 200 units at $34 per unit - Direct materials used in production:
In manufacture of BirdHouse: Wood 0.80 ft. per unit of product Plastic 0.50 lb. per unit of product In manufacture of Bird Feeder: Wood 1.20 ft. per unit of product Plastic 0.75 lb. per unit of product - Anticipated cost of purchases and beginning and ending inventory of direct materials:
Wood $8.00 per ft. Plastic $1.20 per lb. - Direct labor requirements:
Birdhouse: Fabrication Department 0.20 hr. at $15 per hr. Assembly Department 0.30 hr. at $12 per hr. Bird Feeder: Fabrication Department 0.40 hr. at $15 per hr. Assembly Department 0.35 hr. at $12 per hr. - Estimated
factory overhead costs for January:Indirect factory wages $80,000 Depreciation of plant and equipment 25,000 Power and light 8,000 Insurance and property tax 2,000 - Estimated operating expenses for January:
Sales salaries expense $90,000 Advertising expense 20,000 Office salaries expense 18,000 Depreciation expense—office equipment 800 Telephone expense—selling 500 Telephone expense—administrative 200 Travel expense—selling 5,000 Office supplies expense 250 Miscellaneous administrative expense 450 - Estimated other income and expense for January:
Interest revenue $300 Interest expense 224 - Estimated tax rate: 30%
Prepare a budgeted income statement for January.
Birds of a Feather Inc. Budgeted Income Statement For the Month Ending January 31 |
|||
---|---|---|---|
Revenue from sales | |||
Cost of goods sold | |||
Gross profit | |||
Selling and administrative expenses: | |||
Selling expenses | |||
Administrative expenses | |||
Total selling and administrative expenses | |||
Income from operations | |||
Other revenue: | |||
Interest revenue | |||
Other expenses: | |||
Interest expense | |||
Income before income tax | |||
Income tax (30% rate) | |||
Net income | $ |
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