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Budgeted Income Statement and Supporting Budgets

The budget director of Feathered Friends 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 December 2016:

Estimated sales for December:

Bird house	3,200 units at $50 per unit
Bird feeder	3,000 units at $70 per unit

Estimated inventories at December 1:

Direct materials:
Wood	200 ft.
Plastic	240 lbs.
Finished products:
Bird house	320 units at $27 per unit
Bird feeder	270 units at $40 per unit

Desired inventories at December 31:

Direct materials:
Wood	220 ft.
Plastic	200 lbs.
Finished products:
Bird house	290 units at $27 per unit
Bird feeder	250 units at $41 per unit

Direct materials used in production:

In manufacture of Bird House:
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	$7.00 per ft.
Plastic	$1.00 per lb.

Direct labor requirements:

Bird House:
Fabrication Department	0.20 hr. at $16 per hr.
Assembly Department	0.30 hr. at $12 per hr.
Bird Feeder:
Fabrication Department	0.40 hr. at $16 per hr.
Assembly Department	0.35 hr. at $12 per hr.

Estimated factory overhead costs for December:

Indirect factory wages	$75,000
Depreciation of plant and equipment	23,000
Power and light	$6,000
Insurance and property tax	5,000

Estimated operating expenses for December:

Sales salaries expense	$70,000
Advertising expense	18,000
Office salaries expense	21,000
Depreciation expenseoffice equipment	600
Telephone expenseselling	550
Telephone expenseadministrative	250
Travel expenseselling	4,000
Office supplies expense	200
Miscellaneous administrative expense	400

Estimated other income and expense for December:

Interest revenue	$200
Interest expense	122

Estimated tax rate: 30%

Required:

1. Prepare a sales budget for December.

Feathered Friends Inc. Sales Budget For the Month Ending December 31, 2016
	Unit Sales Volume	Unit Selling Price	Total Sales
Bird house
Bird feeder
Total revenue from sales

2. Prepare a production budget for December.

Feathered Friends Inc. Production Budget For the Month Ending December 31, 2016
	Units
		Bird House		Bird Feeder
Expected units to be sold
Plus desired inventory, December 31, 2016
Total
Less estimated inventory, December 1, 2016
Total units to be produced

3. Prepare a direct materials purchases budget for December.

Feathered Friends Inc. Direct Materials Purchases Budget For the Month Ending December 31, 2016
	Wood	Plastic	Total
Required units for production:
Bird house
Bird feeder
Plus desired units of inventory, December 31, 2016
Total
Less estimated units of inventory, December 1, 2016
Total units to be purchased
Unit price
Total direct materials to be purchased

4. Prepare a direct labor cost budget for December.

Feathered Friends Inc. Direct Labor Cost Budget For the Month Ending December 31, 2016
			Fabrication Department		Assembly Department	Total
Hours required for production:
	Bird house
	Bird feeder
	Total
Hourly rate
Total direct labor cost

5. Prepare a factory overhead cost budget for December.

Feathered Friends Inc. Factory Overhead Cost Budget For the Month Ending December 31, 2016
	Indirect factory wages
	Depreciation of plant and equipment
	Power and light
	Insurance and property tax
	Total

6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be $29,000, and work in process at the end of December is estimated to be $35,400.

Feathered Friends Inc. Cost of Goods Sold Budget For the Month Ending December 31, 2016
Direct materials:
Cost of direct materials available for use
Cost of direct materials placed in production
Total manufacturing costs
Total work in process during the period
Cost of goods manufactured
Cost of finished goods available for sale
Cost of goods sold

7. Prepare a selling and administrative expenses budget for December.

Feathered Friends Inc. Selling and Administrative Expenses Budget For the Month Ending December 31, 2016
Selling expenses:
	Sales salaries expense
	Advertising expense
	Telephone expenseselling
	Travel expenseselling
	Total selling expenses
Administrative expenses:
	Office salaries expense
	Depreciation expenseoffice equipment
	Telephone expenseadministrative
	Office supplies expense
	Miscellaneous administrative expense
	Total administrative expenses
Total operating expenses

8. Prepare a budgeted income statement for December.

Feathered Friends Inc. Budgeted Income Statement For the Month Ending December 31, 2016
Operating expenses:
	Total operating expenses
Other income:
Other expenses:

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