| Calculate The Bottled Water Company's net income for the new product in the coming year by completing the operating budgets and budgeted income statement that follow. |
| 1. Sales Budget: | | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Sales in Units | 40,000 | 30,000 | 50,000 | 55,000 | 175,000 |
| X selling price/unit | $1 | $1 | $1 | $1 | $1 |
| Total Sales | $40,000 | $30,000 | $50,000 | $55,000 | $175,000 |
| | | | | | |
| 2. Production budget: | | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Sales in Units | 40,000 | 30,000 | 50,000 | 55,000 | 175,000 |
| Plus Desired units of ending finsished goods inventory* | 3000 | 5,000.0 | 5,500.0 | 6000 | 6000 |
| Desired total units | 43,000 | 35,000.0 | 55,500.0 | 61,000.0 | 181,000.0 |
| Less desire units of beginning finished goods inventory ** | 4000 | 3000 | 5000 | 5500 | 4000 |
| Total production units | 39,000 | 32,000 | 50,500 | 55,500 | 177,000 |
| | | | | | |
| * Desired units of ending finished goods inventory = 10% of next quarter's budgeted sales. |
| ** Desired units of beginning finished goods inventory = 10% of current quarter's budgeted sales. |
| | | | | | |
| 3. Direct materials purchases budget: | | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Total Production Units | 39,000 | 32,000 | 50,500 | 55,000 | 176,500 |
| x 20 ounces per unit | 20 | 20 | 20 | 20 | 20 |
| total production needs in ounces | 780,000 | 640,000 | 1,010,000 | 1,100,000 | 3,530,000 |
| plus desired ounces of ending direct materials inventory * | 128,000 | 101,000 | 110,000 | 240,000 | 240,000 |
| = | 908,000 | 741,000 | 1,120,000 | 1,340,000 | 3,770,000 |
| less desired ounces of beginning direct materils inventory ** | 156,000 | 128,000 | 101,000 | 110,000 | 156,000 |
| total ounces of direct materials to be purchased | 752,000 | 128,000.0 | 202,000.0 | 220,000.0 | 706,000.0 |
| X cost per ounce | $0.01 | $0.01 | $0.01 | $0.01 | $0.01 |
| Total Cost of direct materials purchases | $7,520.00 | $1,280.00 | $2,020.00 | $2,200.00 | $7,060.00 |
| | | | | | |
| * Desired ounces of ending direct materials inventory = 20% of next wuarter's budgeted production needs in ounces. |
| ** Desired ounces of beginning direct materials inventory = 20% of current quarter's budgeted production needs in ounces |
| | | | | | |
| 4. Direct labor budget: | | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Total production Units | 39000 | 32,000 | 50,500 | 55,000 | 176,500 |
| X Direct labor hours per unit | 0.001 | 0.001 | 0.001 | 0.001 | 0.001 |
| Total Direct labor hours | 39 | 32 | 50.5 | 55 | 176.5 |
| x Direct labor cost per hour | $8 | $8 | $8 | $8 | $8 |
| Total direct labor cost | $312 | $256 | $404 | $440 | $1,412 |
| | | | | | |
| 5. Overhead Budget | | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Variable overhead costs | | | | | |
| Facrotry supplies ($.01) | 390 | 320.00 | 505.00 | 550.00 | 1,765.00 |
| Employee benefits ($.05) | 1950 | 1,600.00 | 2,525.00 | 2,750.00 | 8,825.00 |
| Inspection ($.01) | 390 | 320.00 | 505.00 | 550.00 | 1,765.00 |
| Maintenance and repair ($.02) | 780 | 640.00 | 1,010.00 | 1,100.00 | 3,530.00 |
| Utilities ($.01) | 390 | 320.00 | 505.00 | 550.00 | 1,765.00 |
| Total variable overhead costs | 3900 | 3200 | 5050 | 5500 | 17650 |
| Total fixed overhead costs | 1500 | 1500 | 1500 | 1500 | 6000 |
| Total overhead costs | 5400 | 4700 | 6550 | 7000 | 23650 |
| | | | | | |
| 6. Selling and administrative expense budget | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Variable selling and administrative expenses | | | | | |
| Delivery expenses ($.01) | $400 | $320 | $505 | $550 | $1,765 |
| Sales commisions ($.02) | $800 | 640.00 | 1,010.00 | 1,100.00 | 3,530.00 |
| Accounting ($.01) | $400 | $320 | $505 | $550 | $1,765 |
| Other administrative expenses ($.01) | $400 | $320 | $505 | $550 | $1,765 |
| Total variable selling and administrative expenses | $2,000 | $1,600 | $2,525 | $2,750 | $8,825 |
| Total fixed selling and administrative expenses | $5,000 | $5,000 | $5,000 | $5,000 | $5,000 |
| Total selling and administrative expenses | $7,000 | $6,600 | $7,525 | $7,750 | $13,825 |
| 7. Cost of goods manufactured budget | | | | | |
| | Quarter | |
| | 1 | 2 | 3 | 4 | YEAR |
| Direct Materials Used | | | | | |
| direct materials inventory, beginning | | | | | |
| purchases | | | | | |
| cost of direct materials available for use | | | | | |
| less direct materials incentory ending | | | | | |
| cost of direct materials used | | | | | |
| direct labor costs | | | | | |
| overhead scosts | | | | | |
| total manufacturing costs | | | | | 0 |
| work in process inventory, beginnning | | | | | 0 |
| less work in process inventory, ending | | | | | |
| costs of goods manufactured | | | | | |
| Manufactured Cost per Unit = cost of goods manufactured / Units Produduced | | | | | |
| | | | | | |
| * It is the companies policy to have no units in process at the end of the year | |
| | | | | | |
| 8. Budgeted income statement | | | | | |
| | | | | | |
| Sales | | ? | | | |
| cost of goods sold | | | | | |
| finished goods inventory, beginning | ? | | | | |
| cost of goods manufactured | ? | | | | |
| costs of finished goods available for sale | ? | | | | |
| less finished goods incentory, ending | ? | | | | |
| cost of goods sold | | ? | | | |
| Gross Margin | | ? | | | |
| Selling and administrative expenses | | ? | | | |
| Income from operations | | ? | | | |
| Incomes taxes expense (30%) | | ? | | | |
| Net income | | ? | | | |
| | | | | | |
