E23-2 Prepare a sales budget for 2 quarters
Edington Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104.
The calculators sell for $15 and $25 respectively. Because of the intense competition Edington faces,
management budgets sales semiannually. The projections for the first 2 quarters of 2017 are as follows.
Product Quarter 1 Quarter 2
XQ-103 20,000 22,000
XQ-104 12,000 15,000
No changes in selling prices are anticipated.
Instructions
Prepare a sales budget for the 2 quarters ending June 30, 2017. List the products and show for each
quarter and for the 6 months, units, selling price, and total sales by product and in total.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Selling Total Selling Total Selling Total
Product Units Price Sales Units Price Sales Units Price Sales
XQ-103 Value $15 ? Value $15 ? ? $15 ?
XQ-104 Value 25 ? Value 25 ? ? 25 ?
Totals ? ? ? ? ? ?
After you have completed E23-2 consider the following additional question.
1. Assume that the number of XQ-103 units sold in Quarter 2 and XQ-104 in Quarter 1
changed to 30,000 and 17,000 respectively. Revise the flexible budget report for
the two quarters ending June 30, 2017.
Unit Sales
EDINGTON ELECTRONICS INC.
Sales Budget
For the Six Months Ending June 30, 2017
Quarter 1
Quarter 2
Six Months
E23-2 Solution
Selling Total Selling Total Selling Total
Product Units Price Sales Units Price Sales Units Price Sales
EDINGTON ELECTRONICS INC.
Sales Budget
For the Six Months Ending June 30, 2017
Quarter 2
Six Months
E23-2 Solution to additional question
1. Assume that the number of XQ-103 units sold in Quarter 2 and XQ-104 in Quarter 1
changed to 30,000 and 17,000 respectively. Revise the flexible budget report for
the two quarters ending June 30, 2017.
Selling Total Selling Total Selling Total
Product Units Price Sales Units Price Sales Units Price Sales
XQ-103 20,000 $15 $300,000 30,000 $15 $450,000 50,000 $15 $750,000
EDINGTON ELECTRONICS INC.
Sales Budget
For the Six Months Ending June 30, 2017
Quarter 1
Quarter 2
Six Months
E23-4 Prepare quarterly production budgets
Turney Company produces and sells automobile batteries, the heavy-duty HD-240.
The 2017 sales forecast is as follows.
Quarter HD-240
15,000
27,000
38,000
410,000
The January 1, 2017, inventory of HD-240 is 2,000 units. Management desires an ending
inventory each quarter equal to 40% of the next quarter’s sales. Sales in the first quarter of
2018 are expected to be 25% higher than sales in the same quarter in 2017.
Instructions
Prepare quarterly production budgets for each quarter and in total for 2017.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
1 2 3 4 Year
Expected unit sales Value Value Value Value
Add: Desired ending finished goods units ? ? ? ?
Total required units ? ? ? ?
Less: Beginning finished goods units Value Value Value Value
Required production units ? ? ? ? ?
After you have completed E23-4 consider the following additional question.
1. Assume that sales for quarter 2, 3, and 4 changed to 7,500, 9,000 and 12,000 units respectively.
In addition, the desired ending inventory each quarter changed to 45% of the next quarter sales.
Revise the quarterly production budgets for each quarter and in total for 2017.
TURNEY COMPANY
Production Budget
For the Year Ending December 31, 2017
Product HD-240
Quarter
E23-4 Solution
1 2 3 4 Year Year
Expected unit sales 5,000 7,000 8,000 10,000
Add: Desired ending finished goods units(1) 2,800 3,200 4,000 2,500
For the Year Ending December 31, 2017
Product HD-240
TURNEY COMPANY
Production Budget
Quarter
E23-4 Solution to additional question
1. Assume that sales for quarter 2, 3, and 4 changed to 7,500, 9,000 and 12,000 units. In addition,
the desired ending inventory each quarter changed to 45% of the next quarter sales. Revise
the quarterly production budgets for each quarter and in total for 2017.
1 2 3 4 Year
Expected unit sales 5,000 7,500 9,000 12,000
Add: Desired ending finished goods units (1) 3,375 4,050 5,400 2,813
TURNEY COMPANY
Production Budget
For they ear Ending December 31, 2017
Product HD-240
Quarter
E23-11 prepare a manufacturing overhead budget for the year
Atlanta Company is preparing its manufacturing overhead budget for 2017. Relevant data
consist of the following.
Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000.
Direct labor: time is 1.5 hour per unit.
Variable overhead costs per direct labor hour: indirect materials $0.80; indirect labor
$1.20; and maintenance $0.50.
Fixed overhead costs per quarter: supervisory salaries $35,000; depreciation $15,000;
and maintenance $12,000.
Instructions
Prepare the manufacturing overhead budget for the year; showing quarterly data.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
1 2 3 4 Year
Variable costs
Indirect materials ($0.80/hour) ? ? ? ? ?
Indirect labor ($1.20/hour) ? ? ? ? ?
Maintenance ($0.50/hour) ? ? ? ? ?
Total variable ? ? ? ? ?
Fixed costs
Supervisory salaries Value Value Value Value ?
Depreciation Value Value Value Value ?
Maintenance Value Value Value Value ?
Total fixed ? ? ? ? ?
Total manufacturing overhead ? ? ? ? ?
Units to be produced Value Value Value Value ?
Direct labor hours per unit 1.5 1.5 1.5 1.5 1.5
Total direct labor hours ? ? ? ? ?
Manufacturing overhead rate per direct labor hour ?
After you have completed E23-11 consider the following additional question.
1 Assume that the direct labor required per unit changed to 1.75 hour per unit and the variable
overhead costs for indirect labor changed to $1.10. Revise the Manufacturing Overhead Budget
to reflect these changes.
ATLANTA COMPANY
Manufacturing Overhead Budget
For the Year Ending December 31, 2017
Quarter
E23-11 Solution
1 2 3 4 Year
Variable costs
Indirect materials ($0.80/hour) 12,000$ 14,400$ 16,800$ 19,200$ 62,400$
Indirect labor ($1.20/hour) 18,000 21,600 25,200 28,800 93,600
Maintenance ($0.50/hour) 7,500 9,000 10,500 12,000 39,000
Total variable 37,500 45,000 52,500 60,000 195,000
Fixed costs
Supervisory salaries 35,000 35,000 35,000 35,000 140,000
ATLANTA COMPANY
Manufacturing Overhead Budget
For the Year Ending December 31, 2017
Quarter
E23-11 Solution to additional question
1 Assume that the direct labor required per unit changed to 1.75 hour per unit and the variable
overhead costs for indirect labor changed to $1.10. Revise the Manufacturing Overhead Budget
to reflect these changes.
1 2 3 4 Year
Variable costs
Indirect materials ($0.80/hour) 14,000$ 16,800$ 19,600$ 22,400$ 72,800$
Indirect labor ($1.10/hour) 19,250 23,100 26,950 30,800 100,100
Fixed costs
Supervisory salaries 35,000 35,000 35,000 35,000 140,000
Depreciation 15,000 15,000 15,000 15,000 60,000
Maintenance 12,000 12,000 12,000 12,000 48,000
ATLANTA COMPANY
Manufacturing Overhead Budget
For the Year Ending December 31, 2017
Quarter
P23-1A Prepare budgeted income statement and supporting budgets.
Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following
data are available for preparing budgets for Snare for the first 2 quarters of 2017.
1. Sales: quarter 1, 40,000 bags; quarter 2, 56,000 bags. Selling price is $60 per bag.
2. Direct materials: each bag of Snare requires 4 pounds of Gumm at a cost of $3.80 per
pound and 6 pounds of Tarr at $1.50 per pound.
3. Desired inventory levels:
Type of Inventory January 1 April 1 July 1
Snare (bags) 8,000 15,000 18,000
Gumm (pounds) 9,000 10,000 13,000
Tarr (pounds) 14,000 20,000 25,000
4. Direct labor: direct labor time is 15 minutes per bag at an hourly rate of $16 per hour.
5. Selling and administrative expenses are expected to be 15% of sales plus $175,000 per quarter.
6. Interest Expense is $100,000.
7. Income taxes are expected to be 30% of income before income taxes.
Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected
costs to be 125% of direct labor cost, and (2) The direct materials budget for Tarr shows the cost of Tarr
purchases to be $297,000 in quarter 1 and $439,500 in quarter 2.
Instructions
Prepare the budgeted multi-step income statement for the first 6 months and all required operating budgets by
quarters. (Note: Use variable and fixed in the selling and administrative expense budget.) Do not
prepare the manufacturing overhead budget or the direct materials budget for Tarr.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .
Six
1 2 Months
Expected unit sales Value Value ?
Unit selling price $60 $60 $60
Total sales ? ? ?
Six
1 2 Months
Expected unit sales Value Value
Add: Desired ending finished goods units Value Value
Total required units ? ?
Less: Beginning finished goods units Value Value
Required production units ? ? ?
Six
1 2 Months
Units to be produced Value Value
Direct materials per unit (lbs.) X 4lbs X 4lbs
Total pounds needed for production ? ?
Add: Desired ending direct materials (lbs.) Value Value
Total materials required ? ?
Less: Beginning direct materials (lbs.) Value Value
Direct materials purchases ? ?
Cost per pound X $3.80 X $3.80
Total cost of direct materials purchases ? ? ?
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Direct Materials Budget – Gumm
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Production Budget
COOK FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Six
1 2 Months
Units to be produced Value Value
Direct labor hours per unit X 1/4 X 1/4
Total required direct labor hours ? ?
Direct labor cost per hour X $16 X $16
Total direct labor cost ? ? ?
Six
1 2 Months
Budgeted sales in units Value Value ?
Variable (.15 x sales) Value Value ?
Fixed Value Value ?
Total ? ? ?
Sales revenue ?
Cost of goods sold ?
Gross Profit ?
Selling and administrative expenses Value
Income from operations ?
Interest expense Value
Income before income tax ?
Income tax expense (30%) ?
Net income ?
Cost per Bag
Cost Element Quantity Unit Cost Total
Direct Materials
Gumm 4 pounds Value ?
Tarr 6 pounds Value ?
Direct Labor 1/4 hour Value ?
Manufacturing overhead ?
(125% of direct labor cost)
Total ?
After you have completed P23-1A consider the following additional question.
1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that
the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate
changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes.
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2017
Selling and Administrative Budget
Direct Labor Budget
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
P23-1A Solution
Six
12 Months
Expected unit sales 40,000 56,000 96,000
Six
12 Months
Expected unit sales 40,000 56,000
Add: Desired ending finished goods units 15,000 18,000
Six
1 2 Months
Units to be produced 47,000 59,000
Direct materials per unit (lbs.) x 4lbs x 4lbs
Total pounds needed for production 188,000 236,000
Add: Desired ending direct materials (lbs.) 10,000 13,000
Six
12 Months
Units to be produced 47,000 59,000
Direct labor hours per unit x 1/4 x 1/4
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Direct Materials Budget – Gumm
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2017
Quarter
Production Budget
COOK FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Six
1 2 Months
Budgeted sales in units 40,000 56,000 96,000
Sales revenue $5,760,000
Cost of goods sold * 3,187,200
Gross Profit 2,572,800
Selling and administrative expenses 1,214,000
Cost per bag
Cost element Quantity Unit Cost Total
Direct materials
Gumm 4 pounds $3.80 $15.20
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2017
Selling and Administrative Budget
COOK FARM SUPPLY COMPANY
P23-1A Solution to additional question
1. Assume that the expected unit sales in Quarter 1 changed to 36,000 bags of Snare. Also assume that
the amount of direct material (Gumm) used changed to 5 pounds per bag; and, that the direct labor rate
changed to $18 per hour. Revise the budgets and budgeted income statement to reflect these changes.
Six
12 Months
Expected unit sales 36,000 56,000 92,000
Six
1 2 Months
Expected unit sales 36,000 56,000
Add: Desired ending finished goods units 15,000 18,000
Six
1 2 Months
Units to be produced 43,000 59,000
Direct materials per unit (lbs.) x 5lbs x 5lbs
Six
1 2 Months
Units to be produced 43,000 59,000
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Direct Materials Budget – Gumm
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2017
Quarter
Production Budget
COOK FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
Quarter
COOK FARM SUPPLY COMPANY