As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 2009, the following tentative trial balance as of December 31, 2008, is prepared by the Accounting Department of Coconut Grove Soap Co.:
|
Cash |
$ 90,000 |
|
|
Accounts Receivable |
108,600 |
|
|
Finished Goods |
72,400 |
|
|
Work in Process |
27,500 |
|
|
|
|
|
|
Materials |
49,700 |
|
|
Prepaid Expenses |
3,400 |
|
|
Plant and Equipment |
350,000 |
|
|
Accumulated Depreciation—Plant and Equipment |
|
$130,400 |
|
Accounts Payable |
|
57,000 |
|
Common Stock, $10 par |
|
185,000 |
|
Retained Earnings |
|
329,200 |
|
|
$701,600 |
$701,600 |
Factory output and sales for 2009 are expected to total 215,000 units of product, which are to be sold at $4.60 per unit. The quantities and costs of the inventories at December 31, 2009, are expected to remain unchanged from the balances at the beginning of the year.
Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:
|
|
Estimated Costs and Expenses |
|
|
|
Fixed |
Variable |
|
|
(Total for Year) |
(Per Unit Sold) |
|
Cost of goods manufactured and sold: |
|
|
|
Direct materials |
— |
$0.80 |
|
Direct labor |
— |
0.45 |
|
Factory overhead: |
|
|
|
Depreciation of plant and equipment |
$45,000 |
— |
|
Other factory overhead |
7,000 |
0.30 |
|
Selling expenses: |
|
|
|
Sales salaries and commissions |
40,000 |
0.35 |
|
Advertising |
55,000 |
— |
|
Miscellaneous selling expense |
4,500 |
0.15 |
|
Administrative expenses: |
|
|
|
Office and officers salaries |
67,100 |
0.17 |
|
Supplies |
3,000 |
0.06 |
|
Miscellaneous administrative expense |
2,000 |
0.09 |
Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of $80,000 on 2009 taxable income will be paid during 2009. Regular quarterly cash dividends of $0.80 a share are expected to be declared and paid in March, June, September, and December. It is anticipated that fixed assets will be purchased for $60,000 cash in May.
Instructions
1. Prepare a budgeted income statement for 2009.
2. Prepare a budgeted balance sheet as of December 31, 2009, with supporting calculations.