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Country Cookin' Inc. begins the budgeting process for the following year in the 1st quarter of the current year. With the information provided below, prepare the sales, production and direct materials budgets for the 1st quarter of next year. Also determine the budgeted manufacturing cost per unit and prepare the budgeted income statement for January of next year.

Country Cookin' Inc. sells the cooker/smokers they manufacture to various retailers for $130 each. Each cooker/smoker requires 11 ounces of raw material, which is purchased by Country Cookin' Inc. for $8.00 per ounce. To prepare for next month's production, Country Cookin' Inc. likes to maintain an ending stock of raw material equal to 10% of the production requirements for the current month. The company would also like to maintain an ending stock of finished cooker/smokers equal to 20% of next month's sales.

Sales are projected to be 6,000 for January, 8,000 for February and 14,000 for March.

Your Company expects to sell 12,000 cooker/smokers in April and needs 132,000 ounces of direct materials for production.

15% of sales from Country Cookin' Inc. to retailers are cash sales, while the remaining 85% are sold on account.

Additional budgeted information includes:

Month

1st Quarter

Projections For Next Year

January

February

March

Direct labor

$ 24,000

$ 34,500

$ 51,000

$ 109,500

Manufacturing overhead:

Variable

$ 28,800

$ 41,400

$ 61,200

$ 131,400

Fixed 1

$ 41,000

$ 41,000

$ 41,000

$ 123,000

Total operating expenses 2

$ 71,000

$ 74,000

$ 95,000

$ 240,000

Each cooker/smoker requires 0.25 of an hour of direct labor at the rate of $15.00.

Country Cookin' Inc. estimated at the beginning of the year that it would produce 307,500 cooker/smokers next year.

Interest expense is budgeted at zero since the company has no outstanding debt.

Income tax expense is budgeted at 35% of income before taxes.

Prepare next year's 1st quarter sales budget for Country Cookin' Inc.

Country Cookin' Inc.

Sales Budget

For the Quarter Ended March 31

Month

1st Quarter

January

February

March

Unit sales

Unit selling price

Total sales revenue

Type of Sale

Cash sales

Credit sales

Total sales revenue

Prepare next year's 1st quarter production budget for Country Cookin' Inc.

Country Cookin' Inc.

Production Budget

For the Quarter Ended March 31

Month

1st Quarter

January

February

March

Unit sales

Plus: Desired ending inventory

Total needed

Less: Beginning inventory

Units to produce

Prepare next year's 1st quarter direct materials budget for Country Cookin'.

Country Cookin' Inc.

Direct Materials Budget

For the Quarter Ended March 31

Month

1st Quarter

January

February

March

Units to be produced

x Ounces of direct materials needed per unit

Ounces needed for production

Plus: Desired ending inventory of direct materials

Total ounces needed

Less: Beginning inventory of direct materials

Ounces to purchase

x Cost per ounce

Total cost of direct materials purchases

Prepare next year's budgeted manufacturing cost per unit for Country Cookin' Inc.

Country Cookin' Inc.

Budgeted Manufacturing Cost per Unit

January

Direct materials

Direct labor

Manufacturing overhead:

Variable

Fixed

hint: you must take into account total annualized fixed costs in relation to total expected units for the year

Cost of manufacturing each widget

Prepare next year's budgeted income statement for the month ended January 31 for Country Cookin' Inc.

Country Cookin' Inc.

Budgeted Income Statement

For the month ended January 31

Sales Revenue

Less: Cost of goods sold

Gross profit

Less: Operating expenses

Operating income

Less: Interest expense

Less: Income tax expense

Net income

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