Oak Creek Company is preparing its budgeted income statement for 2016. Relevant data pertaining to its sales, production, and direct materials budgets are found in D10-12.

In addition, Oak Creek budgets 0.3 hours of direct labour per unit, labour costs at $14 per hour, and manufacturing overhead at $20 per direct labour hour. Its budgeted selling and administrative expenses for 2016 are $7 million.

D10-12

Oak Creek Company is preparing its master budget for 2016. Relevant data pertaining to its sales, production and direct materials budgets are as follows.

Sales: Sales for the pear are expected to total I million units. Quarterly sales are 20%. 25%, 25% and 30%. respectively. The sales price is expected to be $40 per unit for the first three quarters and US per unit beginning in the fourth quarter. Sales in the first quarter of 2017 are expected to be 10% higher than the budgeted sales for the first quarter of 2016.

Production: Management desires to maintain the ending finished goods inventories at 20% of the next quarter's budgeted sales volume.

Instructions

(a) Calculate the budgeted total unit cost.

(b) Prepare the budgeted income statement for 2016.