The company expects to sell 7,200 bottles of SlickTone in the first quarter, 6,2
ID: 2446285 • Letter: T
Question
The company expects to sell 7,200 bottles of SlickTone in the first quarter, 6,200 in the second quarter, 10,900 in the third quarter, and 8,900 in the fourth quarter.
A bottle of SlickTone requires 5 ounces of Chemical A and 3.5 ounces of Chemical B.
For the first, second, and third quarters of 2015, the desired ending inventory of finished goods is equal to 9 percent of next quarter’s sales, whereas the desired ending inventory for material is 13 percent of next quarter’s production requirements.
There are 1,700 bottles of SlickTone, 4,900 ounces of Chemical A, and 1,600 ounces of Chemical B on hand at the beginning of the first quarter.
At the end of the fourth quarter, the company must have 1,000 bottles of SlickTone, 8,600 ounces of Chemical A, and 3,900 ounces of Chemical B to meet its needs in the first quarter of 2016.
The cost of Chemical A is $1.00 per ounce, the cost of Chemical B is $0.14 per ounce, and the selling price of SlickTone is $14 per bottle.
The cost of direct labor is $0.60 per bottle, and the cost of variable overhead is $0.80 per bottle. Fixed manufacturing overhead is $2,800 per quarter.
Variable selling and administrative expense is 4 percent of sales and fixed selling and administrative expense is $2,900 per quarter.
1: Prepare a material purchases budget for each quarter of 2015 for chemical A.
DONE
2: Prepare a material purchases budget for each quarter of 2015 for chemical B.
DONE
3. Prepare a budgeted income statement for each quarter of 2015 (ignore taxes).
NEED HELP - THE RED BOXES ARE INCORRECT, THOSE ARE THE ONES THAT I NEED ASSISTANCE WITH.
Explanation / Answer
Working Note
Working Note
Sales 100800 86800 152600 124600 Less: Variable Cost Variable Cost of Goods Sold 89136 76756 134942 110182 Variable selling & admin: 4% of Sales 4032 3472 6104 4984 Contribution Margin 7632 6572 11554 9434 Less: Fixed Costs Fixed manufacturing overhead 2800 2800 2800 2800 Fixed selling & admin 2900 2900 2900 2900 Net Income 1932 872 5854 3734