
Concept explainers
1.
Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.
To Prepare: The sales budget for the month ending December 31.
1.

Explanation of Solution
The following table shows the sales budget.
Company F Sales Budget For the Month Ending December 31 | |||
Product and Area | Unit Sales Volume | Unit Selling Price ($) | Total Sales ($) |
(A) | (B) | (A) × (B) | |
Birdhouse | 3,200 | 50 | 160,000 |
Bird feeder | 3,000 | 70 | 210,000 |
Total Revenue from Sales | 370,000 |
Table (1)
2.
To Prepare: The production budget for the month ending December 31.
2.

Explanation of Solution
The following table shows the production budget.
Company F Production Budget For the Month Ending December 31 | ||
Details | Units | |
Birdhouse | Bird Feeder | |
Expected Units to be Sold | 3,200 | 3,000 |
Add: Desired Inventory, December 31 | 290 | 250 |
Total Units Required | 3,490 | 3,250 |
Less: Estimated Inventory, December 1 | (320) | (270) |
Total Units to be Produced | 3,170 | 2,980 |
Table (2)
3.
To Prepare: The direct materials purchase budget for the month ending December 31.
3.

Answer to Problem 3PA
The following table shows the direct materials purchase budget.
Company F Direct Materials Purchase Budget For the Month Ending December 31 | ||
Details | Units | |
Wood | Plastic | |
Required units for production: | ||
Birdhouse | 2,536 (1) | 1,585 (2) |
Bird Feeder | 3,576 (3) | 3,576 (4) |
Add: Desired inventory, December 31 | 220 | 200 |
Total units required | 6,332 | 4,020 |
Less: Estimated inventory, December 1 | (200) | (240) |
Total units to be purchased (A) | 6,132 | 3,780 |
Unit price (B) | $7 | $1 |
Total (A) × (B) | $42,924 | $3,780 |
Total direct materials to be purchased | 46,704 |
Table (3)
Explanation of Solution
Working Notes:
Calculate the direct material (wood) for birdhouse.
Calculate the direct material (plastic) for birdhouse.
Calculate the direct material (wood) for bird feeder.
Calculate the direct material (plastic) for bird feeder.
4.
To Prepare: The direct labor cost budget of Company F.
4.

Answer to Problem 3PA
The following table shows the direct labor cost budget for fabrication and assembly department.
Company F | ||
Direct Labor Cost Budget | ||
For the Month Ending December 31 | ||
Particulars | Fabrication Department |
Assembly Department |
Hours Required for Production: | ||
Birdhouse | 634 (5) | 951 (6) |
Bird feeder | 1,192 (7) | 1,043 (8) |
Total Hours Required (A) | 1,826 | 1,994 |
Hourly Rate (B) | $16 | $12 |
Total Cost (A) × (B) | $29,216 | $23,928 |
Total Direct Labor Cost | $53,144 |
Table (4)
Explanation of Solution
Working Notes:
Calculate the hours required for the production of birdhouse in fabrication department.
Calculate the hours required for the production of birdhouse in assembly department.
Calculate the hours required for the production of bird feeder in fabrication department.
Calculate the hours required for the production of bird feeder in assembly department.
5.
To Prepare: The
5.

Explanation of Solution
The following table shows the factory
Company F | |
Factory Overhead Cost Budget | |
For the Month Ending December 31 | |
Particulars | Amount ($) |
Indirect factory wages | 75,000 |
23,000 | |
Power and light | 6,000 |
Insurance and property tax | 5,000 |
Total | 109,000 |
Table (5)
6.
To Prepare: The cost of goods sold budget of Company F.
6.

Answer to Problem 3PA
The following table shows the cost of goods sold budget.
F Company | |||
Cost of Goods Sold Budget | |||
For the month ending December 31 | |||
Particulars | Amount ($) | Amount ($) | Amount ($) |
Finished goods inventory, December 1 | 19,440 (9) | ||
Work-in-process inventory, December 1 | 29,000 | ||
Direct material: | |||
Direct materials inventory, December 1 | 1,640 (10) | ||
Direct materials purchases | 46,704 | ||
Cost of direct materials available for use | 48,344 | ||
Less: Direct materials inventory, December 31 | (1,740) (11) |
||
Cost of direct materials placed in production | 46,604 | ||
Direct labor | 53,144 | ||
Factory overhead | 109,000 | ||
Total manufacturing cost | 208,748 | ||
Total work-in-process during the period | 237,748 | ||
Less: Work-in-process inventory, December 30 | (35,400) | ||
Cost of goods manufactures | 202,348 | ||
Cost of finished goods available for sale | 221,788 | ||
Less: Finished goods inventory, December 30 | (18,080) (12) | ||
Cost of Goods Sold | 203,708 |
Table (6)
Explanation of Solution
Working Notes:
Calculate the beginning finished goods inventory.
Calculate the beginning direct material.
Calculate the ending direct material.
Calculate the ending finished goods inventory.
7.
To Prepare: The selling and administrative expenses budget of Company F.
7.

Explanation of Solution
The following table shows the selling and administrative expenses budget.
Company F | ||
Selling and Administrative Budget | ||
For the Month Ending December 31 | ||
Particulars | Amount ($) | Amount ($) |
Selling expense: | ||
Sales salaries expense | 70,000 | |
Advertising expense | 18,000 | |
Telephone expense | 550 | |
Travel expense | 4,000 | |
Total selling expense | 92,550 | |
Administrative expense: | ||
Office salaries expense | 21,000 | |
Depreciation expense – office equipment | 600 | |
Telephone expense – Administrative | 250 | |
Office supplies expense | 200 | |
Miscellaneous administrative expense | 400 | |
Total administrative expenses | 22,450 | |
Total Operating Expenses | 115,000 |
Table (7)
8.
To Prepare: The
8.

Explanation of Solution
Prepare the budgeted income statement of Company F.
Company F | ||
Budgeted Income Statement | ||
For the Month Ending December 31 | ||
Particulars | Amount ($) | Amount ($) |
Revenue from sales | 370,000 | |
Less: Cost of goods sold | (203,708) | |
Gross profit | 166,292 | |
Operating expenses: | ||
Selling expenses | 92,550 | |
Administrative expenses | 22,450 | |
Total operating expenses | (115,000) | |
Income from operations | 51,292 | |
Other revenue and expenses: | ||
Interest revenue | 200 | |
Interest expense | (122) | 78 |
Income before income tax | 51,370 | |
Income tax expense (30%) | (15,411) | |
Net Income | 35,959 |
Table (8)
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