Create an operating budget for the first quarter of a new business.
Projected Sales are:
Month #1: $65,000
Month #2: $97,500
Month #3: $130,000
Month #4: $100,019
These sales are based on selling one product with a selling price of $6.50
Create a Production Budget based on Units (not dollars).
• Desired Finished Goods Ending Inventory each month is 10% of the next month’s projected sales
Create a Direct Materials Purchase Budget
• Each unit produced requires 10# of direct materials at a cost of $0.08 per pound.
• Desired Ending Direct Materials Inventory is 10% of the next month’s material requirements.
Create a Direct Labor Budget
• Direct Labor Costs are $15/hour
• Each unit requires 5 minutes of labor
Create an Overhead Budget
• Variable Overhead Expenses are:
o Supplies ($.02 per unit)
o Inspection ($.10 per unit)
o Maintenance and Repair ($.03 per unit)
o Utilities ($.01 per unit)
• Fixed Overhead Expenses are $1100 monthly.
Create a Selling and Administrative Budget
• Variable Selling & Administrative Expenses are:
o Sales Commissions ($.03 per unit)
o Delivery ($.01 per unit)
o Office Support ($.02 per unit)
• Fixed Selling & Administrative Expenses are $2500 monthly.
Combine all Budgets to Create a Budgeted Income Statement
Complete a Budgeted Income Statement for months 1 through 3, and a Budgeted Income Statement that reflects the total first quarter.
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