Spring Manufacturing Company makes two components identified as C12 and D57. Selected budgetary data for 2019 follow:
C15 (Finished Component) D57 (Finished Component)
Requirements for each finished component: RM 1 10 pounds 8 pounds
RM 2 0 4 pounds
RM 3 2 pounds 1 pound
Direct labor 2 hours 3 hours
Product information: Sales price $200 $220
Sales (units) 12,000 9,000
Estimated beginning inventory (units) 430 160
Desired ending inventory (units) 300 200
RM1 (Direct Materials Information) RM2 (Direct Materials Information) RM3 (Direct Materials Information)
Cost per pound $4 $3.50 $0.50
Estimated beginning inventory in pounds 2,500 1,000 500
Desired ending inventory in pounds 4,500 1,500 2,000
The firm expects the average wage rate to be $25 per hour in 2019. Spring Manufacturing uses direct labor hours to apply overhead. Each year the firm determines the overhead application rate for the year based on budgeted direct labor hours for the year. The firm maintains negligible Work-in-Process Inventory and expects the cost per unit for both beginning and ending inventories of finished products to be identical.
Factory Overhead Information
Indirect materials-variable $11,000
Miscellaneous supplies and tools-variable 4,900
Indirect labor-variable 45,000
Supervision-fixed 160,000
Payroll taxes and fringe benefits-variable 200,000
Maintenance costs-fixed 24,000
Maintenance costs-variable 10,090
Depreciation-fixed 71,320
Heat, light, and power-fixed 43,400
Heat, light, and power-variable 12,000
Total $581,710
Selling and Administrative Expense Information
Advertising $56,000
Sales salaries 180,000
Travel and entertainment 64,000
Depreciation-warehouse 5,400
Office salaries 64,000
Executive salaries 230,000
Supplies 4,100
Depreciation-office 6,300
Total $609,800
The effective income tax rate for the company is 30%.
Required:
1. Prepare the Sales budget for 2019.
2. Prepare the Production budget for 2019.
3. Prepare the Direct materials purchases budget (units and dollars) for 2019.
4. Prepare the Direct labor budget for 2019.
5. Prepare the Factory overhead budget for 2019.
6. Prepare the Cost of goods sold and ending finished goods inventory budgets for 2019.
7. Prepare the Selling and administrative expense budget, broken down into two components: Selling Expenses, and Administrative Expenses for 2019.
8. Prepare the Budgeted income statement, the last item of which is labeled After-tax Operating Income for 2019.