The budget director of HI Performance Athletic Co., with the assistance of the c

Question

The budget director of HI Performance Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January 2012:

a. Estimated Sales for January:
Batting helmet............................................305 units at $70 per unit
Football helmet...........................................630 units at $135 per unit

b. Estimated inventories at January 1:
Direct Materials Finished Products
Plastic...........80 lbs Batting helmet....... 35 units at $40 per unit
Foam lining.....60 lbs Football helmet.......40 units at $60 per unit

c. Desire inventoris at January 31:
Direct materials: Finished products:
Plastic.........90 lbs Batting helmet.......30 units at $40 per unit
Foam lining...55 lbs Football helmet.....50 units at $58 per unit

d. Direct material used in production:

In manufacture of batting helmet:
Plastic...........................................1.20 lbs per unit of product
Foam lining......................................0.50 lbs per unit of product
In manufacture of football helmet
Plastic...........................................2.80 lbs per unit of product
Foam lining.....................................1.40 lbs per unit of product

e. Anticipated cost of purchases and beginning and ending inventory of direct materials:
Plastic...........................................$5.50 per lb
Foam lining ....................................$4.00 per lb

f. Direct labor requirements:
Batting helmet:
Molding department ........................................ 0.20 hr at $15 per hr
Assembly department....................................... 0.50 hr at $13 per hr
Football helmet:
Molding deapartment........................................0.30 hr at $15 per hr
Assembly department........................................0.65 hr at $13 per hr

g. Estimated factory overhead costs for January:
Indirect factor wages $14,500
Depreciation of plant and equipment 4,200
Power and light 2,000
Insurance and property tax 1,700

h. Estimated operating expenses for January:
Sales salaries expense $15,400
Advertising expense 8,500
Office salaries expense 11,500
Depreciation expense-office equipment 3,200
Telephone expense-selling 950
Telephone expense-administrative 600
Travel expense-selling 2,300
Office supplies expense 550
Miscellaneous administrative expense 400

i. Estimated other income and expense for January:
Interest revenue $140
Interest expense 172

j. Estimated tax rate: 30 %

Instructions:
1. Prepare a sales budget for January
2. Prepare a production budget for January
3. Prepare a direct material purchases budget for January
4. Prepare a direct labor cost budget for January
5. Prepare a factory overhead cost budget for January
6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimate to be $12,500, and workin process at the end of January is desired to be $13,500.
7. Prepare a selling and administrative expenses budget for January.
8. Prepare a budgeted income statement for January.

Explanation / Answer

Part 8:

HI Performance Athletic Co Budgeted Income Statement For the Month Ending January 31, 2012 Revenue from sales                  106,400 Cost of goods sold                     48,258 Gross profit                     58,142 Operating expenses: Selling expenses                  27,150 Administrative expenses                  16,250 Total operating expenses                     43,400 Income from operations                     14,742 Other income: Interest revenue                        140 Other expenses: Interest expense                        172                           (32) Income before income tax                     14,710 Income tax expense (30% rate)                       4,413 Net income                     10,297

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