ADMS 3510 Chapter Notes -Budget, Income Statement

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raspberryantelope879

2 May 2013

School

York University

Department

Administrative Studies

Course

ADMS 3510

Professor

Rebecca Jubis

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Document Summary

Manufacturing overhead budget costs for the budget period. The manufacturing overhead budget shows the expected manufacturing overhead. As shown in manufacturing budget below, this budget distinguishes between variable and fixed overhead costs. Hayes company expects variable costs to fluctuate with the production volume based on the following rates per direct labour hour: indirect materials ; indirect labour. Hayes also recognizes that some maintenance is fixed. The amounts reported for fixed costs are assumed in our example. Hayes company combines its operating expenses into one budget, the selling and administrative expenses budget - projects selling and administrative expenses for the budget period. Expenses are classified as either variable or fixed. In this case, the variable expense rates per unit of sales are of sales commissions and of freight out. Variable expenses per quarter are based on the unit sales from the sales budget. For example, sales in the first quarter are expected to be 3,000 units.

Related Questions

The computationof operating income for Frisco Company for 2013 follows:
Sales		$1,800,000
Costof Goods manufactured and sold:
Directmateirals	$360,000
Direct Labor	240,000
Variable manufacturing Overhead	120,000
Fixedmanufacturing overhead	240,000	960,000
GrossMargin		$840,000
Selling Expenses:
Variable	132,000
Fixed	168,000	300,000
		$540,000
Administrative Exepenses:
Variable	$156,000
Fixed	192,000	348,000
NetOperating income		$192,000

Anoperating budget is prepared for 2014 with sales forecasted at a25% increase in volume.
Directmaterials, direct labor and all costs labeled as variable arecompletely variable.
Fixedcosts are expected to continue except for a $24,000 increase infixed administrative costs. Actual operating data for 2014are:
Sales	$2,160,000
DirectMaterial	444,000
Direct Labor	288,000
Variable manufacturing overhead	148,800
Fixedmanufacturing overhead	246,000
Variable sellling exoenses	186,000
Fixedselling expenses	157,200
Variable administrative expenses	198,000
FixedAdministrative expenses.	218,200

a)Prepare a budget reprot comparing the 2014 planned operating budgetwith actual 2014 data
b)Prepare a budget report that would be useful in appraising theperformance of the various persons charged with responsibility toprovide satisfactory income.
Hint:Prepare budget data on a flexible basis and use the percentage bywhich sales wew actually experiences.
c)Comment on the differences revealed by the two reports.

Dozier Company produced and sold 1,000 units during its first month of operations. It reported the following costs and expenses for the month:


Direct materials			$	82,000
Direct labor			$	41,500
Variable manufacturing overhead	$	20,200
Fixed manufacturing overhead		31,900
Total manufacturing overhead			$	52,100
Variable selling expense	$	14,600
Fixed selling expense		23,200
Total selling expense			$	37,800
Variable administrative expense	$	5,300
Fixed administrative expense		27,600
Total administrative expense			$	32,900

Required:

1. With respect to cost classifications for preparing financial statements:

a. What is the total product cost?

b. What is the total period cost?


1a.	Total product cost
1b.	Total period cost

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Show your work

Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The companyâs current owner would like to know how a newproduct would affect the companyâs 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 nextquarterâs 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 companyâs 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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ADMS 3510 Chapter Notes -Budget, Income Statement

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