Preparation of Individual Budgets During the first calendar quarter of 2016, Cli
ID: 2528463 • Letter: P
Question
Preparation of Individual Budgets During the first calendar quarter of 2016, Clinton Corporation is planning to manufacture a new product and introduce it in two regions. Market research indicates that sales will be 7,000 units in the urban region at a unit price of $53 and 6,000 units in the rural region at $48 each. Because the sales manager expects the product to catch on, he has asked for production sufficient to generate a 5,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses: Variable Fixed (per unit) (total) Manufacturing costs: Direct materials $12.60 9.30 7.50 A (4 lb. @ $3.15/lb.) B (2 lb. $4.65/lb.) Direct labor (0.5 hours per unit) Manufacturing overhead: Depreciation Factory supplies Supervisory salaries Other -$7,650 0.90 4,500 - 28,800 0.75 22,950 Operating expenses: Selling: Advertising Sales salaries & commissions* Other* 22,500 1.50 15,000 0.90 3,000 Administrative:Explanation / Answer
3. Material Purchase Budget Material A Material B Total Pound required for production 18000*4 and 18000*2 72000 36000 add: Desired ending inventory 5000 7000 Total Pounds to be available 77000 43000 Less: beginning Inventory available 0 0 Total Material to be purchased 77000 43000 Total Material purchases 77000*3.15 242550 199950 43000*4.65 4. Direct Labor Cost Total Production (Units) 18000 Per unit Direct Labor Cost 7.5 Total Direct Labor Cost 135000 (18000*7.5) 5. Manufacturing Overhead Cost Fixed Variable Total Depreciation 7650 0 7650 Factory Supplies 4500 16200 20700 Supervisor Salaries 28800 0 28800 Others 18000*0.75 22950 13500 36450 Total Manufacturing Overhead 63900 29700 93600 6. Selling and Administrative Cost Fixed Variable Total Selling Expense: -Advertising 22500 0 22500 -Sale Commission 1.5*13000 Sale Units 15000 19500 34500 -Other 0.9*13000 3000 11700 14700 Total Selling Expense 40500 31200 71700 Administrative Expense: -Office Salaries 2700 2700 -Supplies 0.15*18000 1050 2700 3750 -Others 0.08*18000 1950 1440 3390 Total Administrative Expense: 5700 4140 9840 Total Selling and Administrative Expense 46200 35340 81540 7. Budgeted Income Statement Sales 659000 Cost of Goods Sold: -Beginning Inventory - FG 0 Material: Beginning Inventory Material 0 add: Material Purchase 242550+199950 442500 Material Available 442500 Less: Ending Inventory-Material 48300 (5000*3.15)+(7000*4.65) Direct Material 394200 Direct Labor 135000 Manufacturing Overhead 93600 Total Manufacturing Cost 622800 Cost of goods available for sale 622800 Less: Ending Inventory-FG 173000 622800/18000*5000 Cost of Goods Sold 449800 Gross Margin 209200 Operating Expenses: Selling 71700 Admin 81540 Total Operating Expense 153240 Income Before Tax 55960 Income Tax (Assumed to be 30%) 16788 Net Income 39172