Newport Inc. gathered the following data for use in developing the budgets for the first quarter (June, July, August) of its fiscal year:

a. Estimated sales at $36 per unit:

June. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 units

July. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 units

August. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 units

September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 units

b. Estimated finished goods inventories:

May 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000 units

June 30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5% of next month’s sales

July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5% of next month’s sales

August 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5% of next month’s sales

c. Work in process inventories are estimated to be insignificant (zero).

d. Estimated direct materials inventories:

May 31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 pounds

June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 pounds

July 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 pounds

August 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 pounds

e. 

Manufacturing costs:........................................................................................................Per Unit

Direct materials (1.5 lbs. per unit × $4 per lb.).............................................................$ 6.00

Direct labor (0.4 hr. per unit × $25 per hr.)...................................................................10.00

Variable factory overhead ($4 per direct labor hour)...................................................1.60

Fixed factory overhead ($1,200,000 per month allocated using 500,000 units).......2.40

Total per-unit manufacturing costs..............................................................................$20.00

f. Selling expenses:

Variable selling expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3 per unit

Fixed selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $800,000

Administrative expenses (all fixed costs) . . . . . . . . . . . . . . . . . . . . . . $550,000

Instructions

Prepare the following budgets using one column for each month and a total column for the first quarter, as shown for the sales budget:

1. Prepare a sales budget for August.

2. Prepare a production budget for August.

3. Prepare a direct materials purchases budget for August.

4. Prepare a direct labor cost budget for August.

5. Prepare a factory overhead cost budget for August.

6. Prepare a cost of goods sold budget for August.

7. Prepare a selling and administrative expenses budget for August.

8. Prepare a budgeted income statement with budgeted operating income for August.

Transcribed Image Text:

Newport Inc. Sales Budget For the First Quarter Ending August 31 June First Quarter 1,200,000 July August Estimated units sold 300,000 400,000 500,000