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Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The company’s current owner would like to know how a newproduct would affect the company’s rent income in the comingyear.

Required

Calculate Ginnie Springs net income for the new product in thecoming year by completing the operating budgets and budgeted incomestatement that follow. Assume that the selling price will remainconstant.

Sales budget

Ginnie Springs Company

Sales Budget

Forthe year Ended December 31

Quarter

1

2

3

4

Year

Sales in Units

40,000

30,000

50,000

55,000

175,000

Selling price per unit

X $1

X ?

X ?

X ?

X ?

Totals Sales

40,000

$ ?

X ?

X ?

X ?

2. Production Budget:

Ginnie SpringsCompany

ProductionBudget

For the year Ended December31_____________

Quarter

1

2

3

4

Year

Sales in Units

40,000

?

?

?

?

Plus desired units of ending finished goods inventory*

30,000

?

?

6000

6000

Desired total Units

43000

?

?

?

?

Less desired units of ending finished goods inventory*

4000

?

?

?

4000

Total Production units

39,000

?

?

?

?

*Desired units of ending finished goods inventory = 10% of nextquarter’s budgeted production needs in ounces. Desired ounces ofbeginning direct materials inventory = 20% of current quartersbudgeted production needs in ounces.

3.DirectMaterials Purchases budget

Ginnie SpringsCompany

Direct Materials PurchaseBudget

For the year Ended December31_____________

Quarter

1

2

3

4

Year

Total production units

39,000

32,000

50,500

55,500

?

Ounces per unit

X 20

X 20

X 20

X 20

X 20

Total production needs in ounces

780,000

?

?

?

?

Plus desired ounces of ending direct materials inventory*

128,000

908,000

?

?

?

?

240,000

?

240,000

?

Less desired ounces of ending direct materials inventory*

156,000

?

?

?

156,000

Total ounces of direct material to be purchased

752,000

?

?

?

?

Cost per ounce

X $0.01

X ?

X ?

X ?

X ?

Total cost of direct materials purchases

$7520

?

?

?

?

Desired ounces of ending direct material inventory =20% of nextquarters budgeted production needs in ounces.

Desired ounces of beginning direct materials inventory = 20% ofcurrent quarters budgeted production needs in ounces.

4.Directlabor budget:

Ginnie SpringsCompany

Direct LaborBudget

For the year EndedDecember 31_____________

Quarter

1

2

3

4

Year

Total production units

39,000

?

?

?

?

Direct labor hours per units

X 0.001

X ?

X ?

X ?

X ?

Total direct labor hours

39.0

?

?

?

?

Direct labor cost per hour

X $8

X ?

X ?

X ?

X ?

Total direct labor cost

$312

$ ?

$ ?

$ ?

$ ?

5.Overheadbudget

Ginnie SpringsCompany

Overhead Budget

For the year EndedDecember 31_____________

Quarter

1

2

3

4

Year

Variable overhead costs:

Factory supplies ($0.01)

$ 390

$ ?

$ ?

$ ?

$ ?

Employee benefits ($0.05)

1,950

?

?

?

?

Inspection ($0.01)

390

?

?

?

?

Maintenance and repairs($0.02)

780

?

?

?

?

Utilities ($0.01)

390

?

?

?

?

Total Variable overheadcosts

$3900

$ ?

$ ?

$ ?

$ ?

Total fixed overhead costs

1416

?

?

?

?

Total overhead costs

$5,316

$ ?

$ ?

$ ?

$ ?

Note: The figures in parentheses are variable costs perunit.

6.Sellingand administrative expenses budget:

Ginnie SpringsCompany

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Quarter

1

2

3

4

Year

Variable Selling and Administrative expenses

Delivery expenses ($0.01)

$ 400

$ ?

$ ?

$ ?

$ ?

Sales Commission ($0.02)

800

?

?

?

?

Accounting ($0.01)

400

?

?

?

?

Other administrative expenses($0.01)

400

?

?

?

?

Total Variable selling and administrative exp.

$2,000

$ ?

$ ?

$?

$?

Total fixed selling and administrative exp.

5000

?

?

$?

?

Total selling and administrative expenses

$ 7,000

$ ?

$ ?

$ ?

$ ?

Note: The figures in parentheses arevariable costs per unit

7. Cost of goods manufactured budget:

Ginnie SpringsCompany

Cost of Goods Manufactured Budget

For the year EndedDecember 31_____________

Direct Material Used:

Direct Material Inventory,Beginning

Purchases

Cost of Direct materials available foruse

Less: Direct materials Inventory,ending

Cost of Direct Materialsused

Direct laborcosts:

Overhead costs:

Total manufacturing costs

Work in Process Inventory,beginning*

Less: work in process inventory,ending*

Cost of Goods Manufactured

Units produced

Manufactured cost perunit

It is the company’s policy to have no units in process at theend of theyear.

8. Budgeted income statement

Ginnie Springs Company

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Sales

Cost of goods sold

Finished goods inventory beginning

Cost of goods manufactured

Cost of Goods available for sale

Less finished goods inventory, ending

Cost of good sold

Gross margin

Selling and administrative expenses

Income from operations

Income taxes expenses (30% tax rate)

Net Income

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Elin Hessel
Elin HesselLv2
28 Sep 2019

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