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    Managerial Accounting - Budgeted Income Statement

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    Problem 5-3A
    Budgeted income statement
    And supporting budgets

    Objective 4

    Total direct labor cost in
    Slitting Dept., $205,120

    The budget director of Instant Memories Film company, 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 October 2003.

    a. Estimated sales for October:

    Instant Image................ 26,800 units at $65 per unit
    Pro Image.................... 20,400 units at $90 per unit

    b. Estimated inventories at October 1:

    Direct materials: Finished Products:
    Celluloid.......2,700 lbs Instant Image.......4,800 units at $35 per unit
    Silver.......... 3,000 ozs. Pro Image........... 2,400 units at $55 per unit

    c. Desired inventories at October 31:

    Direct materials: Finished Products:
    Celluloid.......3,400 lbs Instant Image.......5,400 units at $35 per unit
    Silver.......... 2,900 ozs. Pro Image........... 1,900 units at $55 per unit

    d. Direct materials used in production:

    In manufacture of Instant Image:
    Celluloid........................... 0.40 lb. per unit of product
    Silver............................... 2.50 ozs. per unit of product

    In manufacture of Pro Image:
    Celluloid........................... 0.60 lb. per unit of product
    Silver............................... 4.00 ozs. per unit of product

    e. Anticipated cost of purchases and beginning and ending inventory of direct materials:

    Celluloid........... $1.50 per lbs Silver................$6 per oz.

    f. Direct labor requirements:

    Instant Image:
    Coasting Department............0.20 hour at $14 per hour
    Slitting Department..............0.25 hour at $16 per hour

    Pro Image:
    Coasting Department............0.40 hour at $14 per hour
    Slitting Department...............0.30 hour at $16 per hour

    g. Estimated factory overhead costs for October:

    Indirect factory wages $525,000
    Depreciation of plant and equipment 145,000
    Power and lights 46,000
    Insurance and property tax 18,400

    h. Estimated operating expenses for October:

    Sales salaries expense $225,000
    Advertising expense 146,500
    Office salaries expense 120,800
    Depreciation expense-office equipment 5,300
    Telephone expense-selling 5,000
    Telephone expense-administrative 1,900
    Travel expense-selling 38,500
    Office supplies expense 3,000
    Miscellaneous administrative expense 4,200

    i. Estimated other income and expense for October:

    Interest revenue $16,700
    Interest expense 12,300

    j. Estimated tax rate: 40%

    Instructions

    1. Prepare a sales budget for October.
    2. Prepare a production budget for October
    3. Prepare a direct materials purchases budget for October
    4. Prepare a direct labor cost budget for October
    5. Prepare a factory overhead cost budget for October
    6. Prepare a cost of goods sold budget for October. Work in process at the beginning of October is estimated to be $28,500, and work in process at the end of October is estimated to be $34,200.
    7. Prepare a selling and administrative expenses budget for October
    8. Prepare a budgeted income statement for October.

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