Step 5: Manufacturing Overhead Budget

Buff Company expects variable overhead costs to fluctuate with production volume according to the following rates:

Indirect materials: $0.90 per direct labor

Indirect labor: $1.70 per direct labor

Utilities: $0.30 per direct labor

Maintenance: $0.10 per direct labor

Buff Company also incurs fixed overhead costs. The amounts of fixed overhead costs are already provided in the budget below. Use this information to complete the manufacturing overhead budget.

Buff Company Manufacturing Overhead Sales Budget

For the year ending December 31, 2017

Variable costs Indirect materials ($0.90/hour) Q1_________ Q2_________ Q3_________ Q4_________

Indirect labor ($1.70/hour) Q1_________ Q2_________ Q3_________ Q4_________

Utilities ($0.30/hour) Q1_________ Q2_________ Q3_________ Q4_________

Maintenance ($0.10/hour) Q1_________ Q2_________ Q3_________ Q4_________

Total variable costs Q1_________ Q2_________ Q3_________ Q4_________

Fixed costs

Supervisory salaries Q1 $37,600 Q2 $37,600 Q3 $37,600 Q4 $37,600 Total in a year $150400

Depreciation Q1 $2,900 Q2 $2,900 Q3 $2,900 Q4 $2,900 Total in a year $11600

Property taxes and insurance Q1 $1,600 Q2 $1,600 Q3 $1,600 Q4 $1,600 Total in a year $6,400

Maintenance Q1 $3,400 Q2 $3,400 Q3 $3,400 Q4 $3,400Total in a year $13,600

Total fixed costs Q1_________ Q2_________ Q3_________ Q4_________

Total manufacturing overhead Q1_________ Q2_________ Q3_________ Q4_________

Direct labor hours Q1_________ Q2_________ Q3_________ Q4_________

Using the yearly amounts, what is the annual budgeted overhead rate per direct labor hour?

Step 6: Selling and Administrative Expense Budget

Buff Company expects variable selling and administrative expenses to fluctuate with unit sales volume according to the following rates:

Sales commission $3.60 per unit sold

Freight-out: $2.80 per unit sold

Buff Company also incurs fixed selling and administrative expenses. The amounts of fixed selling and administrative expenses are already provided in the budget below. Use this information to complete the selling and admin. expense budget

Buff Company Selling and Admi Sales Budget For the year ending December 31, 2017

Budgeted sales in units Q1 1,800 Q2 1,700 Q3 2,300 Q4 2,800 Total in a year 8,600

Variable expenses

Sales commissions ($3.60 per unit) Q1_________ Q2_________ Q3_________ Q4_________

Freight-out ($2.80 per unit) Q1_________ Q2_________ Q3_________ Q4_________

Total variable expenses Q1_________ Q2_________ Q3_________ Q4_________

Fixed expenses Advertising Q1 $3,200 Q2 $3,200 Q3 $3,200 Q4 $3,200 Total in a year $12,800

Sales salaries Q1 $13,600 Q2 $13,600 Q3 $13,600 Q4 $13,600 Total in a year $54,400

Office salaries Q1 $7,000 Q2 $7,000 Q3 $7,000 Q4 $7,000 Total in a year $28,000

Depreciation Q1 $800 Q2 $800 Q3 $800 Q4 $800 Total in a year $3,200

Property taxes and insurance Q1 $1,000 Q2 $1,000 Q3 $1,000 Q4 $1,000 Total in a year $4,000

Total fixed expenses Q1_________ Q2_________ Q3_________ Q4_________

Total selling and administrative expenses Q1_________ Q2_________ Q3_________ Q4_________

Step 7: Budgeted Income Statement

Complete the following schedule to determine the cost of goods sold:

Cost to produce one product

Direct materials Quantity 1.50 Unit cost $1.00

Direct labor Quantity 2.50 Unit cost $12.00

Manufacturing overhead Quantity 2.50

Total unit cost _________

Cost of goods sold

Total Unit cost Number of units budgeted to be sold during 2017 = Budgeted Cost of Goods Sold________

Additional information:

Interest expense for 2017: $1,000

Income tax expense for 2017: $16,500

Use the information above as well as data from the other operating budgets to complete the Budgeted Income Statement

Buff Company Budgeted Income Statement For the Year Ending December 31, 2017

Sales________

Cost of goods sold_______

Gross profit_______

Selling and administrative expenses______

Income from operations________

Interest expense______

Income before income taxes______

Income tax expense_______

Net income_______