Company XYZ is expecting to sell 17,130 robotic dogs in July, 27,130 in August,

ID: 1096196 • Letter: C

Question

Company XYZ is expecting to sell 17,130 robotic dogs in July, 27,130 in August, and 37,130 in September of the year. Selling price per robotic dog is $30. All sales are on account. In the ending of each month, 10% of the budgeted units will be the desirable ending inventory. The beginning inventory of July is worth $30,000 according to the selling price. Besides inventory of products, XYZ also requires inventory of direct materials which is equivalent to the same amount of product inventory.

In the business of selling robotic dogs, XYZ needs to consider the following core parts:

- The robotic dog is simply made of 4 leg components, and each leg costs $0.5.

- The chipset in the control system costs $5 for each robotic dog.

- The cost of each labor is $500 for making 100 robotic dogs; however, in September their wage will be increased by 30%.

- During the manufacturing process, $300 will be charged to depose the waste in manufacturing every 50 robotic dogs; for penalty, the charges will be increased by 50% for each robotic dog waste if the volume excesses 15,000. Moreover, the electricity costs $700 to produce every 200 robotic dogs. The rent of the factory is $5,000 per month, but it will be increased by 20% after July.

- In selling each robotic dog, 7% of selling price will be given to the salesman for commission. There are totally 3 shops in the market, and the rent of each shop is $6,000 per month. The advertising expenses in those three shops are $200, $100 and $50 respectively. Also, XYZ wants to boost the sales in August, by increasing 50% advertising expense in August. Besides, each shop needs $100 for office expense.

- The total salaries of all company staff are $8,000 per month. The insurance of buildings is $500 per month in average. There are additional utilities which cost $70 for each shop per week (assuming 4 weeks in a month for simplicity).

- In addition to the normal operation, XYZ provides additional service of renting robotic dogs out for activities. This service is started in May of the year, which helps XYZ to earn net profit $13,027 in June. By the record, the net income of this service will be increased by 2% in each month.

- Assume the income tax is 71% of the taxable income. If the taxable income is negative or zero, no tax will be charged.

Prepare the budgeted income statement using the following table.

Explanation / Answer

Budgeted income statement (units:$)

4. Operating expenses:

Selling

Administrative

63,963

64,955

85,138

100,955

105,963

135,955

255,064

301,865

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Workings:

1. Calculation of sales:

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2. Calculation of cost of goods sold:

Note;

1. Opening and closing stocks are not relevant here. since quantity of sales is mentioned, cost pf ggods sold will be computed on this basis. Considering these stock figures quantity of goods produced can be ascertained. It is relevant for cash flow, purchase budget etc.

2. Cost of waste disposal is considered as a part of cost of goods sold. It is $300 for 50 dogs if the quantity is upto 1,500 units. Since quantity in each month exceeds 1,500 units, it should be 150%. Thus per robot waste disposal cost is $9.0

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3. Administrative cost:

Notes: Electricity is $700 per 200 units. So electricty per unit is $3.5. It is multiplied by the quantity sold to get total electricity cost.

Rent per month is $5,000. From August it has increased by 20%.

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4. Calculation of Selling cost

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Rental income of July is $13,027. In August it will go up by 2%. So in August it is $13,027x1.02=$13,288. In September it will again increase by 2%. Therefore Rental income of September is $13,288x1.02=$13554.

Details July August September Total 1. Sales 513,900 813,900 1,113,900 2,441,700 2.Cost of goods sold 359,730 569,730 835,425 1,764,885 3.Gross income (1-2) 154,170 244,170 278,475 676,915