Prepare a master budget for V & T Faces, Inc., for the next year. Assume an income tax rate of 40 percent. Include the following:

1. Sales budget
2. Production budget
3. Direct-material budget
4. Direct-labor budget
5. Production-overhead budget
6. Selling and administrative expense budget
7. Budgeted income statement

V&T Faces, Inc. manufactures to types of makeup foundation. Type S is for sensitive skin and type N is for non-sensitive skin. The products have the following materials and labor requirements: Type N Types Direct materials required per 100 bottles Liquid medium Pigment A Direct labor required per 100 bottles ($12/hour) 30 pounds 20 pounds .25 hour 70 pounds 30 pounds .50 hour The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on the production volume of 495,000 bottles. Production overhead is applied on the basis of direct-labor hours. $10,500 49,000 25,000 Indirect material Indirect labor Utilities Property taxes Insurance Depreciation 16,000 18,000 30,000 $ 148,500 Total The following selling and administrative expenses are anticipated for the next year: $80,000 15,000 85,000 Salaries and fringe benefits of sales personnel Advertising Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total 25,000 5,000 $210,000 The sales forecast is as follows: Type N Type S Sales Volume 500,000 bottles 500,000 bottles Sales Price $90 per hundred bottles $130 per hundred bottles The following inventory information is available. The unit production costs for each product are expected to be the same this year and the following year. Expected Inventory January 1 Desired Ending Inventory December 31 10,000 bottles 5,000 bottles 20,000 bottles 15,000 bottles Finished Goods Type N Type S Raw Material Pigment A Liquid medium 15,000 pounds 5,000 pounds 5,000 pounds 10,000 pounds V&T Faces, Inc. manufactures to types of makeup foundation. Type S is for sensitive skin and type N is for non-sensitive skin. The products have the following materials and labor requirements: Type N Types Direct materials required per 100 bottles Liquid medium Pigment A Direct labor required per 100 bottles ($12/hour) 30 pounds 20 pounds .25 hour 70 pounds 30 pounds .50 hour The following production-overhead costs are anticipated for the next year. The predetermined overhead rate is based on the production volume of 495,000 bottles. Production overhead is applied on the basis of direct-labor hours. $10,500 49,000 25,000 Indirect material Indirect labor Utilities Property taxes Insurance Depreciation 16,000 18,000 30,000 $ 148,500 Total The following selling and administrative expenses are anticipated for the next year: $80,000 15,000 85,000 Salaries and fringe benefits of sales personnel Advertising Management salaries and fringe benefits Clerical wages and fringe benefits Miscellaneous administrative expenses Total 25,000 5,000 $210,000 The sales forecast is as follows: Type N Type S Sales Volume 500,000 bottles 500,000 bottles Sales Price $90 per hundred bottles $130 per hundred bottles The following inventory information is available. The unit production costs for each product are expected to be the same this year and the following year. Expected Inventory January 1 Desired Ending Inventory December 31 10,000 bottles 5,000 bottles 20,000 bottles 15,000 bottles Finished Goods Type N Type S Raw Material Pigment A Liquid medium 15,000 pounds 5,000 pounds 5,000 pounds 10,000 pounds