INCOME STATEMENT BUDGET PROBLEM

SUMMER 2013
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 2013. 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
Molding Department and then through an Assembly Department before they are
ready for sale.
Assume that there is no Work-Process-Inventory.
1. Estimated Sales : 25,800 Batting Helmets at $ 40 each and 54,100 Football
Helmets at $ 75 each
st
2. Raw materials inventories at January 1 : Plastic 9,500 pounds and Foam
lining - 4,700 pounds
st
3. Finished Goods inventories at January 1 :
Batting Helmets 2,450 at $ 21 each and Football Helmets 3,900 at $ 40
each
st
4. Desired raw material inventory at December 31 : Plastic 11,400 pounds
and Foam lining 4,500 pounds
st
5. Desired inventory at December 31 :
Batting Helmets 2,400 at $ 21 each and Football Helmets - 3,500 at $ 40
each
6. Direct materials used in production:
Batting Helmet Plastic 1.40 pounds per unit and Foam lining - .60 pounds
per unit
Football Helmet Plastic 3.20 pounds per unit and Foam lining 1.20
pounds per unit
7. Cost of direct materials: Plastics - $ 6.50 per pound and Foam lining - $ 3.00
per pound
8. Direct labor used in production:
Batting Helmets - .16 hour in Molding at $14 per hour and .40 hour in
Assembly at $12 per hour
Football Helmets - .25 hour in Molding and .60 hour in Assembly (same rates)
9. Budgeted Factory Labor Overhead:
Indirect factory wages - $ 250,000 Depreciation on plant and equipment - $
63,000
Utilities - $ 24,000 Insurance and property taxes - $ 9,700
10. Budgeted Operating Expenses:
Sales salaries expense - $ 505,700; Advertising Expense - $ 350,800; Ofce
Salaries Expense
$ 145,800; Depreciation Expense Ofce Equipment - $ 6,200; Telephone
Expense Selling - $
4,700;Telephone Expense Administrative - $ 900; Travel Expense Selling - $
42,100; Ofce
Supplies Expense - $ 4,000; and Miscellaneous Administrative Expenses - $
5,000.

11. Budgeted Other income and expenses:

Interest Revenue - $ 12,500 Interest Expense - $ 15,700
12. Budgeted income tax rate 40%
REQUIRED:
1. Prepare a Budgeted Income Statement for 2013 with supporting schedules.
Please refer to
Exhibits 8 to 15