The Red Midget Company processes and distributes beans. The beans are packed in 1-pound plastic bags and
Question:
The Red Midget Company processes and distributes beans. The beans are packed in 1-pound plastic bags and sold to grocery chains for $0.50 each in boxes of 100 bags. Sales in February were 14,000 boxes, and the firm anticipates selling 16,000 boxes during March. Typically, 80% of the firm’s customers pay within the month of sale, 18% of the customers pay the month after, and 2% of sales are never collected. The firm buys beans from local farmers. The farmers are paid $0.20 per pound, cash. Most of the processing is done automatically. Consequently, most ($80,000) of the firm’s factory overhead is depreciation expense.
The firm advertises heavily and will publish $75,000 worth of advertisements in popular magazines during March. This is up from February’s $60,000 for advertisements. The firm pays for 10% of its advertising in the month the advertisements are run and 90% in the next month.
Following are March’s budgeted Income Statement and Statement of Cost of Goods Manufactured and Sold. All costs and expenses are paid for as incurred unless specifically indicated otherwise above. The firm will begin March with a cash balance of $25,000 and pays a monthly dividend of $15,000 to the owners.
BUDGETED INCOME STATEMENT
Sales …………………………. $800,000
Cost of goods sold …………… 540,000
Gross margin ………………… 260,000
Administrative salaries ……… 80,000
Sales commissions …………… 69,000
Advertising ………………….. 75,000
Bad debt expense ……………. 16,000
Operating Income ……………. $ 20,000
BUDGETED STATEMENT OF COST OF GOODS
MANUFACTURED AND SOLD
Beginning balance direct materials ………….. $ 20,000
Direct materials purchases …………………… 330,000
Materials available for use …………………… 350,000
Ending balance direct materials ……………… 30,000
Direct materials used ………………………… 320,000
Labor costs incurred …………………………. 90,000
Overhead costs ………………………………. 115,000
Cost of good manufactured ………………….. 525,000
Beginning finished goods balance …………… 45,000
Goods available for sale ……………………… 570,000
Ending finished goods balance ……………….. 30,000
Cost of good sold ……………………………… $540,000
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Step by Step Answer:
Cost Management Measuring Monitoring and Motivating Performance
ISBN: 978-0470769423
2nd edition
Authors: Leslie G. Eldenburg, Susan K. Wolcott