Prepare Budgeted Financial Statements (LO 13-6) Cycle-1 is a fast-growing start-

Question

Prepare Budgeted Financial Statements

(LO 13-6)

Cycle-1 is a fast-growing start-up firm that manufactures bicycles. The following income statement is available for October:

Sales volume is expected to increase by 20 percent in November, but the sales price is expected to fall 10 percent. Variable manufacturing costs are expected to increase by 4 percent per unit in November. In addition to these cost changes, variable manufacturing costs also will change with sales volume. Marketing and administrative cash costs are expected to increase by 8 percent.

Cycle-1 operates on a cash basis and maintains no inventories. Depreciation is fixed and should remain unchanged over the next three years.

Required

Prepare a budgeted income statement for November.

Can you provide step by step eqautions

Sales revenue (300 units @ $600 per unit) $180,000 Less Manufacturing costs Variable costs 26,000 Depreciation (fixed) 27,540 Marketing and administrative costs Fixed costs (cash) 67,500 Depreciation (fixed) 22,860 Total costs $143,900 Operating profits $36,100

Explanation / Answer

ans) Budgeted income statement for november

Sales reevnue ( 300 units X 120% X 600 X 90%) = 194400

Less:

Manufacturing costs

Variable costs ( 300 X 120% X 86.67 X 104%) = (32450)

Depreciation (fixed) = (27540)

Marketing and administration costs

FIxed costs (Cash) 67500 X 108% = ( 72900)

Depreciation (Fixed) (22860)

Total costs (155750)

Operating profits 38650

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