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Axiom Mobile Plus company approached you as Management Accounting expert to assist them in...

Question:

Axiom Mobile Plus company approached you as Management Accounting expert to assist them in preparing their 2013 budget. They provided you with the following data:

Expected number of units to be sold in 2013 Model 1: 15,000 units Model 2: 10,000 units

Expected selling Price Model 1: $250 Model 2: $200

Each model requires 5 components (camera, keypad, screen, frame, and motherboard). Model 1 has 2 cameras, while model 2 has only 1 camera.

Component prices are as follows:

Camera: $15 Keypads: $10 Screen: $20 Frame: $3 Motherboard: $12

The company already had a beginning inventory of 3,000 units of each of the above components at a cost of:

Camera: $12.50 Keypads: $9 Screen: $18 Frame: $2.75 Motherboard: $11.50

No ending inventory of any component item or finished goods is required.

Both Mobile models need 5.5 hours of labor at a cost of $5.00 per hour.

Overhead is allocated at a rate of $15 per direct labor hour.

Required: Prepare the following:

Sales Budget

Component Budget

Direct Labor Budget

An overhead Budget

Prepare a budgeted partial income statement to the Gross Profit Line.

Budgeted Income Statement:

Budgeted Income Statement is the expected income resulting from the operations. It can be determine by projecting the budgeted sales and its corresponding cost of goods sold and expenses. It is usually used for planning purposes.

Answer and Explanation:

Sales Budget:

Model 1 Model 2 Total Budgeted Sales
Expected Unit Sales 15,000 10,000
Unit Price 250 200
Sales Budget 3,750,000 2,000,000 5,750,000

Direct Labor Budget:

Total Budgeted Direct Labor
Expected Unit Sales 25,000
DL Hours Per Unit 5.5
Total DL Hours 137,500
DL Cost per Hour 5
Direct labor Budget 687,500

Overhead Budget:

Total Budgeted Direct Labor
Total DL Hours 137,500
Pre determined rate 15
Overhead Budget 2,062,500

DM Cost:

BI Purchses Total DM Cost
Camera 37,500 555,000 592,500
Keypads 27,000 220,000 247,000
Screen 54,000 440,000 494,000
Frame 8,250 66,000 74,250
Mother Board 34,500 264,000 298,500
Total 1,706,250

Budgeted Income Statement:

Sales 5,750,000
DM Cost 1,706,250
DL Cost 687,500
Overhead Cost 2,062,500
Gross Profit 1,293,750

Learn more about this topic:

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
45K

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