Spring Manufacturing Company makes two components identified asC12 and D57. Selected budgetary data for 2019 follow:
| Finished Components |
| C12 | | D57 |
| Requirements for each finished component: | | | | | | | |
| RM 1 | | 10 | pounds | | | 8 | pounds |
| RM 2 | | 0 | | | | 4 | pounds |
| RM 3 | | 2 | pounds | | | 1 | pound |
| Direct labor | | 2 | hours | | | 3 | hours |
| Product information: | | | | | | | |
| Sales price | $ | 200 | | | $ | 220 | |
| Sales (units) | | 12,000 | | | | 9,000 | |
| Estimated beginning inventory (units) | | 430 | | | | 160 | |
| Desired ending inventory (units) | | 300 | | | | 200 | |
|
| Direct Materials Information |
| RM1 | | RM2 | | RM3 |
| Cost per pound | $ | 4 | | | $ | 3.50 | | | $ | 0.50 | |
| Estimated beginning inventory in pounds | | 2,500 | | | | 1,000 | | | | 500 | |
| Desired ending inventory in pounds | | 4,500 | | | | 1,500 | | | | 2,000 | |
|
The firm expects the average wage rate to be $25 per hour in2019. Spring Manufacturing uses direct labor hours to applyoverhead. Each year the firm determines the overhead applicationrate for the year based on budgeted direct labor hours for theyear. The firm maintains negligible Work-in-Process Inventory andexpects the cost per unit for both beginning and ending inventoriesof finished products to be identical.
| Factory
Overhead
Information |
| Indirect materials—variable | $ | 11,000 | |
| Miscellaneous supplies and tools—variable | | 4,900 | |
| Indirect labor—variable | | 45,000 | |
| Supervision—fixed | | 160,000 | |
| Payroll taxes and fringe benefits—variable | | 200,000 | |
| Maintenance costs—fixed | | 24,000 | |
| Maintenance costs—variable | | 10,090 | |
| Depreciation—fixed | | 71,320 | |
| Heat, light, and power—fixed | | 43,400 | |
| Heat, light, and power—variable | | 12,000 | |
| Total | $ | 581,710 | |
|
| Selling and
Administrative
Expense Information |
| Advertising | $ | 56,000 | |
| Sales salaries | | 180,000 | |
| Travel and entertainment | | 64,000 | |
| Depreciation—warehouse | | 5,400 | |
| Office salaries | | 64,000 | |
| Executive salaries | | 230,000 | |
| Supplies | | 4,100 | |
| Depreciation—office | | 6,300 | |
| Total | $ | 609,800 | |
|
The effective income tax rate for the company is 30%.
Required:
1. Prepare the Sales budget for 2019.
2. Prepare the Production budget for 2019.
3. Prepare the Direct materials purchases budget (units anddollars) for 2019.
4. Prepare the Direct labor budget for 2019.
5. Prepare the Factory overhead budget for 2019.
6. Prepare the Cost of goods sold and ending finished goodsinventory budgets for 2019.
7. Prepare the Selling and administrative expense budget, brokendown into two components: Selling Expenses, and AdministrativeExpenses for 2019.
8. Prepare the Budgeted income statement, the last item of whichis labeled After-tax Operating Income for 2019.
