268 Chapter 6 Budgeting Budget estimates of manufacturing costs and operating ex

Question

268 Chapter 6 Budgeting Budget estimates of manufacturing costs and operating expenses for the year are Estimated Costs and Expenses summarized as follows: Fixed Variable (Total for Year) (Per Unit Soldy $1.10 0.65 Cost of goods manufactured and sold Direct materials $40,000 12,000 Factory overhead: 0.40 Depreciation of plant and equipment. Other factory overhead 0.45 46,000 64,000 6,000 Selling expenses: Sales salaries and commissions Advertising Miscellaneous selling expense 0.25 Administrative expenses: Office and officers salaries Supplies Miscellaneous administrative expense 72,400 5,000 4,000 0.12 0.10 0.05 Balances of accounts receivable, prepaid expenses, and ac s payable at the end of the year are not expected to differ significantly from the b ig balances. Federal income tax of $30,000 on 2017 taxable income will be paidd terly cash dividends of $0.15 per share are expected to be detre and paid in March, June, September, and December on 18,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for $75,000 cash in May Instructions 1. Prepare a budgeted income statement for 2017 2. g2017. Regular quar Prepare a budgeted balance sheet as of December 31, 2017, with supporting calcula tions. roblems: Series B PR 6-1B Forecast sales volume and sales budget tal revenueSentinel Systems Inc. prepared the following sales budget for 2016 OBJ. 4 ales, 950 Sentinel Systems Inc.

Explanation / Answer

REGINA SOAP CO. Supporting calculation for budgeted income statement Budgeted Income Statement Factory Overhead: For the Year Ending December 31, 2017 Variable Overhead           80,000 (200000 x 0.40) Sales $1,000,000 Depreciation           40,000 Cost of goods sold: Other           12,000 Direct materials $220,000 Total        132,000 Direct labor 130,000 Factory overhead 132,000 Sales Salaries and Commissions: Cost of goods sold 482,000 Fixed Portion           46,000 Gross profit $518,000 Variable Portion           90,000 (200000 x 0.45) Operating expenses: Total        136,000 Selling expenses: Sales salaries and commissions $136,000 Miscellaneous selling expenses: Advertising 64,000 Fixed Portion             6,000 Miscellaneous selling expenses 56,000 Variable Portion           50,000 (200000 x 0.25) Total selling expenses $256,000 Total           56,000 Administrative expenses: Office and officers salaries $96,400 Office and Officers salaries: Supplies 25,000 Fixed Portion           72,400 Miscellaneous administrative expense 14,000 Variable Portion           24,000 (200000 x 0.12) Total administrative expenses 135,400 Total           96,400 Total operating expenses 391,400 Income before income tax $126,600 Supplies Expense: Income tax expense 30,000 Fixed Portion             5,000 Net income $96,600 Variable Portion           20,000 (200000 x 0.10) Total           25,000 Miscellaneous administrative expense: Fixed Portion             4,000 Variable Portion           10,000 (200000 x 0.05) Total           14,000 REGINA SOAP CO. Budgeted Balance Sheet 1 Cash balance, December 31, 2017: For the Year Ending December 31, 2017 Balance, January 1, 2017 $        85,000 ASSETS Add: Cash from operations Current assets: Net income $   96,600 Cash $135,800 Depreciation of plant and equipment       40,000          136,600 Accounts receivable 125,600 Less: Dividends to be paid in 2017 (18,000 × $0.15 × 4 qtrs) $   10,800 Inventories: Plant and equipment to be acquired in 2017       75,000          (85,800) Finished goods $69,300 Cash balance, December 31, 2017 $      135,800 Work in process 32,500 Materials 48,900 150,700 Prepaid expenses 2,600 2 Retained earnings balance, December 31, 2017: Total current assets $414,700 Balance, January 1, 2017 $ 290,700 Property, plant, and equipment: Plus net income for 2017       96,600 Plant and equipment $400,000 $ 387,300 Less accumulated depreciation 196,200 203,800 Less: Dividends to be paid in 2017 (18,000 × $0.15 × 4 qtrs.)       10,800 Total assets $618,500 Balance, December 31, 2017 $ 376,500 LIABILITIES Current liabilities: Accounts payable $62,000 STOCKHOLDERS’ EQUITY Common stock $180,000 Retained earnings 376,500 Total stockholders’ equity 556,500 Total liabilities and stockholders’ equity $618,500

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