Preparation of Individual Budgets During the first calendar quarter of 2016, Cli
ID: 2539983 • 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 i research indicates that sales will be 6,000 units in the urban region at a unit price of $53 and 5,000 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 4,000-unit ending inventory. The production manager has furnished the following estimates related to manufacturing costs and operating expenses: n two regions. Market Variable Fixed (per unit) (total) Manufacturing costs: Direct materials A (4lb. $3.15b.) B (2 lb.$4.65/b.) $12.60 9.30 7.50 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 .90 3,000 Administrative Office salaries Supplies Other 2,70D 0.15 1,050 08 1,950Explanation / Answer
Answer 1. Region Total Urban Rural Sales in Units 6,000 5,000 11,000 Unit sales Price 53 48 Sales in $ 318,000 240,000 558,000 Answer 2. Sales in Units 11,000 Add: Ending Inventory (in Units) 4,000 Production in Units 15,000 Answer 3. Material Purchase Budget Material A Material B Production in Units 15,000 15,000 Material Required per Unit 4 2 Total Pounds required for Production 60,000 30,000 Desired Ending Materials Inventory 4,000 6,000 Total pounds to be available 64,000 36,000 Beginning Materials Inventory - - Total Materials to be Purchased 64,000 36,000 Material price per pound 3.15 4.65 Total Material Purchased (in $) 201,600 167,400 Answer 4. Direct Labor Costs - 15,000 Units X $7.50 112,500 Answer 5. Manufacturing Overhead Costs Fixed Variable Total Depreciation 7,650 - 7,650 Factory Supplies 4,500 13,500 18,000 Supervisory Salaries 28,800 - 28,800 Other 22,950 11,250 34,200 Total Manufacturing Overhead 88,650 Answer 6. Selling & Administrative Expenses Fixed Variable Total Selling Expenses Advertising 22,500 - 22,500 Sales Salaries & Commisions 15,000 16,500 31,500 Other 3,000 9,900 12,900 Total selling expenses 66,900 Administrative Expenses Office Salaries 2,700 - 2,700 Supplies 1,050 2,250 3,300 Other 1,950 1,200 3,150 Total Administrative Expenses 9,150 Total Selling & Administrative Expenses 76,050 Answer 7. Clinton Corporation Budgeted Income Statement For the Quarter Ended Mar 31, 2016 Sale 558,000 Cost of Goods Sold: Beginning Inventory - Finished Goods - Material: Beginning Inventory - Material - Material Purchases 369,000 Material Available 369,000 Ending Inventory - Materials 40,500 Direct Material 328,500 Direct Labor 112,500 Manufacturing Overhead 88,650 Total Manufacturing Overhead 529,650 Cost of Goods Available For Sale 529,650 Ending Inventory - Finished goods 141,240 Cost of Goods Sold 388,410 Gross Profit 169,590 Operating Expenses: Selling Expenses 66,900 Administrative Expenses 9,150 Total Operating Expenses 76,050 Income before Income Taxes 93,540 Income Tax Expense -30% 28,062 Net Income 65,478