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BUDGET PROBLEM Spring 2014 OL

The Budget Director of Dave, Inc. with the assistance of the Controller, Production Manager and the

Sales Manager has gathered the following data for use in developing the Budgeted Income Statement

for 2014. The Company produces and sells two products: Batting Helmets and Football Helmets. Both

products use two types of materials: Plastic and Foam Lining and they both go through a MoldingDepartment and then through an Assembly Department before they are ready for sale.

PLEASE NOTE: Assume that there is NO Work-Process-Inventory.

1. Estimated Sales : 30,000 Batting Helmets at $ 40 each and 60,000 Football Helmets at $ 75 each2. Raw materials inventories at January 1st: Plastic9,500 pounds and Foam lining - 5,500 pounds3. Finished Goods inventories at January 1st:

Batting Helmets2,500 at $ 20 each and Football Helmets 4,000 at $ 40 each

4. Desired raw material inventory at December 31st: Plastic12,000 pounds and Foam lining -5,000 pounds

5. Desired inventory at December 31st:Batting Helmets2,000 at $ 20 each and Football Helmets - 4,500 at $ 40 each

6. Direct materials used in production:Batting HelmetPlastic1.50 pounds per unit and Foam lining - .50 pounds per unit

Football HelmetPlastic3.00 pounds per unit and Foam lining1.50 pounds per unit

7. Cost of direct materials: Plastics - $ 7.00 per pound and Foam lining - $ 3.00 per pound8. Direct labor used in production:

Batting Helmets - .25 hour in Molding at $15 per hour and .50 hour in Assembly at $12 per hour

Football Helmets - .50 hour in Molding and 1.0 hour in Assembly (same rates)

9. Budgeted Factory Labor Overhead:Indirect factory wages - $ 200,000 Depreciation on plant and equipment - $ 80,000

Utilities - $ 25,000 Insurance and property taxes - $ 10,000

10.Budgeted Operating Expenses:Sales salaries expense - $ 500,000; Advertising Expense - $ 350,000; Office Salaries Expense

$ 145,000; Depreciation Expense Office Equipment - $ 7,000; Telephone Expense Selling - $

4,500;Telephone Expense Administrative - $ 1,000; Travel Expense Selling - $ 45,000; Office

Supplies Expense - $ 4,000; and Miscellaneous Administrative Expenses - $ 5,000.

11.Budgeted Other income and expenses:Interest Revenue - $ 12,000 Interest Expense - $ 16,000

12.Budgeted income tax rate40%REQUIRED:

Prepare a Budgeted Income Statement for 2014 with supporting schedules. Please refer to Exhibits 8 to

15 in your text on pages 986 to 994. Project is due by May 13, 2014.

PLEASE REMEMBER to submit your Project to my NVC E-mail atdangelovich@napavalley.eduand

PLEASE INCLUDE YOUR NAME in the SUBJECT LINE.

mailto:dangelovich@napavalley.edumailto:dangelovich@napavalley.edumailto:dangelovich@napavalley.edumailto:dangelovich@napavalley.edu

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