Question

Budgeted income statement and supporting budgets for three months

Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year:

a. Estimated sales at $125 per unit:

January	25,000	units
February	30,000	units
March	45,000	units
April	50,000	units

b. Estimated finished goods inventories:

January 1	2,000	units
January 31	10%	of next month’s sales
February 28	10%	of next month’s sales
March 31	10%	of next month’s sales

c. Work in process inventories are estimated to be insignificant (zero).

d. Estimated direct materials inventories:

January 1	1,000	lbs.
January 31	1,500	lbs.
February 28	2,000	lbs.
March 31	2,500	lbs.

e. Manufacturing costs:

	Per Unit
Direct materials (0.8 lb. per unit × $15 per lb.)	$ 12
Direct labor (2.5 hrs. per unit × $24 per hr.)	60
Variable factory overhead ($1.20 per direct labor hour)	3
Fixed factory overhead ($200,000 per month, allocated using 40,000 units)	5
Total per-unit manufacturing costs	$80

f. Selling expenses:

Variable selling expenses	$4	per unit
Fixed selling expenses	$150,000
Administrative expenses (all fixed costs)	$400,000

5. Prepare a factory overhead cost budget for March.

Bellaire Inc.
Factory Overhead Cost Budget
For the First Quarter Ending March 31
	January	February	March	First Quarter
Variable factory overhead:
	hrs.	hrs.	hrs.	hrs.
	x$	x$	x$	x$
	$	$	$	$
Fixed factory overhead:
Total factory overhead cost	$	$	$	$

Feedback

6. Prepare a cost of goods sold budget for March.

Bellaire Inc.
Cost of Goods Sold Budget
For the First Quarter Ending March 31
	January	February	March	First Quarter
Beginning finished goods inventory	$	$	$	$
Cost of goods manufactured:
	$	$	$	$
Total cost of goods manufactured	$	$	$	$
	$	$	$	$
	$	$	$	$

Feedback

7. Prepare a selling and administrative expenses budget for March. Enter all amounts as positive number.

Bellaire Inc.
Selling and Administrative Expenses Budget
For the First Quarter Ending March 31
	January	February	March	First Quarter
Selling expenses:
	x$	x$	x$	x$
Total variable selling expenses	$	$	$	$
Total selling expenses	$	$	$	$
Administrative expenses:
Total selling and administrative expenses	$	$	$	$

Feedback

8. Prepare a budgeted income statement with budgeted operating income for March.

Bellaire Inc.
Budgeted Income Statement
For the First Quarter Ending March 31
	January	February	March	First Quarter
	$	$	$	$
Gross profit	$	$	$	$
Selling and administrative expenses:
	$	$	$	$
Total selling and administrative expenses	$	$	$	$
	$	$	$	$

Answer 1

5) FACTORY OVERHEAD COST BUDGET

	jan	feb	march	first quarter
variable factory overhead
hours	65000	78750	113750	257500
rate per hour	$                     1	$                     1	$                     1	$                     1
total variable cost	$           78,000	$           94,500	$       1,36,500	$       3,09,000
fixed factory overhead	$       2,00,000	$       2,00,000	$       2,00,000	$       6,00,000
total factory overhead cost	$       2,78,000	$       2,94,500	$       3,36,500	$       9,09,000

6) COST OF GOODS SOLD BUDGET

	jan	feb	march	first quarter
Beginning finished goods inventory	$       1,60,000	$       2,40,000	$       3,60,000	$           7,60,000
cost of goods manufactured
fixed manufacturing cost	$ 2,00,000.00	$ 2,00,000.00	$ 2,00,000.00	$           6,00,000
manufacturing variable cost @$80 per unit	$     20,80,000	$     25,20,000	$     36,40,000	$         82,40,000
total cost of goods manufactures	$     24,40,000	$     29,60,000	$     42,00,000	$         96,00,000
cost of goods for sale	$     21,78,571	$     25,73,913	$     37,80,000	$         85,32,484
selling expenses	$       6,50,000	$       6,70,000	$       7,30,000	$         20,50,000
cost of goods sold	$     28,28,571	$     32,43,913	$     45,10,000	$     1,05,82,484

7) SELLING AND ADMINISTRATIVE EXPENSES BUDGET

	jan	feb	march	first quarter
selling fixed expenses	$       1,50,000	$       1,50,000	$       1,50,000	$           4,50,000
total variable selling expenses	100000	120000	180000	$           4,00,000
total selling expenses	$       2,50,000	$       2,70,000	$       3,30,000	$           8,50,000
admin expenses	$       4,00,000	$       4,00,000	$       4,00,000	$         12,00,000
total selling and admin expenses	$       6,50,000	$       6,70,000	$       7,30,000	$         20,50,000

8) BUDGETED INCOME STATEMENT

	jan	feb	march	first quarter
Sales	$     31,25,000	$     37,50,000	$     56,25,000	$     1,25,00,000
- cost of goods sold	2828571	3243913	4510000	$     1,05,82,484
gross profit	$       2,96,429	$       5,06,087	$     11,15,000	$         19,17,516