As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 2013, the following tentative trial balance as of December 31, 2012, is prepared by the accounting department of Tahiti Blossom Soap Co.:
Cash...............................................................................$100,000
Accounts receivable.................................................112,300
Finished Goods.........................................................76,700
Work in Process........................................................24,300
Materials...................................................................54,100
Prepaid expenses...................................................3,400
Plant and equipment...............................................295,000
Accumulated Depreciation-Plant and equipment......................................$140,400
Accounts Payable...............................................................................................59,000
Common Stock-$10 par.....................................................................................210,000
Retained earning................................................................................................256,400
665,800 665,800
Factory output and sales for 2013 are expected to total 160,000 units of product, which are to be sold at $4.50 per unit. The quantities and costs of the inventories at December 31, 2013 ar expected to remain unchanged from the balances at the beginning of the year.
Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows:
Costs of goods manufactured and sold:
Direct materials..................................................................................$0.90/unit sold
Direct labot........................................................................................$0.55/unit sold
Factory overhead:
Depreciation of plant and equipment...............................$45,000 (total for year)
Other factory overhead......................................................8,000(total for year) 0.35/unit sold
Selling expenses
Sales salaries and commissions............................................37,000(total for year) 0.40/unit sold
Advertising.............................................................................55,000(total for year)
Miscellaneous selling expense...........................................5,000(total for year) 0.20/unit sold
Administrative expenses
Office and officers salaries...............................................58,200(total for year) 0.15/unit sold
Supplies...............................................................................4,000(total for year) 0.08/unit sold
Miscellaneous administrative expenses......................3,000(total for year) 0.12/unit sold
Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of 20,000 on 2013 taxable income will be paid during 2013. Regular quarterly cash dividends of 0.10per share are expected to be declared and paid in March, June, September, and December on 21,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for 60,000 cash in May.
1. Prepare a budgeted income statement for 2013