Prepare Budgeted Financial Statements
Cameron Parts has the following data from year 1 operations, which are to be used for developing year 2 budget estimates:
|
Revenues (12,500 units) |
$ 1,119,000 |
|
Manufacturing costs |
|
|
Materials |
$ 199,500 |
|
Variable cash costs |
271,350 |
|
Fixed cash costs |
108,000 |
|
Depreciation (fixed) |
133,500 |
|
Marketing and administrative costs |
|
|
Marketing (variable, cash) |
142,500 |
|
Marketing depreciation |
33,900 |
|
Administrative (fixed, cash) |
135,165 |
|
Administrative depreciation |
2,600 |
|
Total costs |
$1,036,515 |
|
Operating profits |
$ 82,485 |
All depreciation charges are fixed. Old manufacturing equipment with an annual depreciation charge of $14,550 will be replaced in year 2 with new equipment that will incur an annual depreciation charge of $21,000. Sales volume and prices are expected to increase by 12 percent and 6 percent, respectively. On a per unit basis, expectations are that materials costs will increase by 10 percent and variable manufacturing costs will decrease by 4 percent. Fixed manufacturing costs are expected to decrease by 7 percent.
Variable marketing costs will change with volume. Administrative cash costs are expected to increase by 8 percent. Inventories are kept at zero. Cameron operates on a cash basis.
Required
Prepare a budgeted income statement for year 2.