P6-2 Bathworks produces hair and bath products. Bathworks’ owner would like to have an estimate of the company’s net income in the coming year.
Required Project Bathworks’s net income next year by completing the operating budgets and budgeted income statement that follows. Assume that the selling price will remain constant.
1. Sales budget:
Bathworks
Sales Budget
For the year Ended December 31
Quarter
1
2
3
4
Year
Sales in units
4,000
3,000
5,000
5,000
17,000
SELLING price per unit
X$5
X?
X?
X?
X?
Total sales
$24,000
?
?
?
?
2. Production budget:
Bathworks
Production Budget
For the year Ended December 31
Quarter
1
2
3
4
year
Sales in units
4,000
?
?
?
?
Plus desired units of ending finished goods inventory
300
?
?
600
600
Desired total units
4,300
?
?
?
?
Less desired units of beginning
Finished goods inventory b
?
?
?
?
400
Total products units
3,900
?
?
?
?
a. Desired units of ending finished goods inventory 5 10% of next quarter’s budgeted sales. b. Desired units of beginning finished goods inventory 5 10% of current quarter’s budgeted sales.
3. Direct materials purchases budget:
Bathworks
Direct Materials Purchases Budget
For the year Ended December 31
quarter
1
2
3
4
Year
Total production units
3,900
3,200
5,000
5,100
17,200
Ounces per unit
X4
X4
X4
X4
X4
Total production needs in ounces
15,600
?
?
?
?
Plus desired ounces of ending direct materials inventory 1
2,560
?
?
3,600
3,600
18,160
?
?
?
?
Less desired ounces of beginning
Direct materials inventory
3,120
?
?
?
3,120
Total ounces of direct materials to be purchased
15,040
?
?
?
?
Cost per ounce
X$0.10
X?
X?
X?
X?
Total cost of direct materials purchases
$1,504
?
?
?
?
a. Desired ounces of ending direct materials inventor = 20% of next quarter’s budgeted production needs in ounces.
b. Desired ounces of beginning direct materials inventory = 20% of current quarte’s budgeted production needs in ounces.
4. Direct labor budget:
Bathworks
Direct labor Budget
For the year Ended December 31
Quarter
1
2
3
4
Year
Total production units
3,900
?
?
?
?
Direct labor hours per unit
X0.10
X?
X?
X?
X?
Total direct labor hours
390
?
?
?
?
Direct labor cost per hour
X$20
X?
X?
X?
X?
Total direct labor cost
$7,8,00
?
?
?
?
5. Overhead budget:
Bathworkds
Overhead Budget
For the Year Ended December 31
Quarter
1
2
3
4
year
Variable costs:
Factory supplies($0.05)
$195
$?
$?
$?
$?
Employee benefits ($0.25)
975
?
?
?
?
Inspection($0.10)
390
?
?
?
?
Maintenance and repairs($0.15)
585
?
?
?
?
Utilities($0.05)
195
?
?
?
?
Total variable overhead costs
$2,340
$?
$?
$?
$?
Total fixed overhead costs
4,300
?
?
?
?
Toal overhead costs
$6,640
$?
$?
$?
$?
6. Selling and administrative expenses budget:
Bathworks
Selling and administrative Expenses Budget
For the year Ended December 31
Quarter
1
2
3
4
Year
Variable selling and administrative expenses:
Delivery expenses(0.10)
$400
$?
$?
$?
$?
Sales commission($0.15)
600
?
?
?
?
Accounting ($0.05)
200
?
?
?
?
Other administrative espenses($0.20)
800
?
?
?
?
Total variable selling and administrative expenses
$2,000
$?
$?
$?
$?
Total fixed selling and administrative expenses
5,000
?
?
?
?
Total selling and administrative expenses
$7,000
$?
$?
$?
$?
7. Cost of goods manufactured budget: 31
Bathworks Cost of Goods Manufactured Budget For the Year Ended December
Direct materials used:
Direct materials inventory, beginning
$?
Purchases
?
Cost of direct materials availale for use
$?
Less direct materials inventory, ending
?
Cost of direct materials used
$?
Direct labor costs
?
Overhead costs
?
Total manufacturing costs
$?
Work in process inventory, beginning
?
Less work in process inventory, ening
?
Cost of goods manufactured
$?
Units produced
?
Manufactured cost per unit
$?
8. Budgeted income statement:
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