Answer:
Brighton, Inc.
a) Schedules Computing Inventory Budgets by months
a1) for Production:
April May June Total
Beginning Inventory 120,000 100,000 120,000 120,000
Units Produced 500,000 500,000 500,000 1,500,000
Inventory available 620,000 600,000 620,000 1,620,000
Less Ending Inventory 100,000 120,000 120,000 120,000
Units sold 520,000 480,000 500,000 1,500,000
a2) Raw Materials Purchases in pounds
April May
Ending inventory 50,000 50,000
Raw materials required 125,000 125,000
Raw materials available 175,000 175,000
Beginning Inventory 58,000 50,000
Purchases 117,000 125,000
Purchases value $4 per pound $468,000 $500,000
b) Projected Income Statement for May:
Net Sales $1,970,000
Cost of goods sold:
Finished Beginning Inventory $480,000
Cost of production 1,460,000
less closing inventory 480,000 $1,460,000
Gross profit $510,000
Selling expenses $200,000
Administrative expenses 155,000 $355,000
Net Income $155,000
Explanation:
a) Sales = $2,000,000
less cash discounts (1%) ($20,000)
less bad debts expense (0.5%) ($10,000)
Net Sales = $1,970,000
c) Sales Budget
April May June July Total
Sales units 600,000 500,000 600,000 600,000 2,300,000
Sales value$2,400,000 $2,000,000 $2,400,000 $2,400,000$9,200,000
d) Cost of Production:
May
Cost of raw materials used $500,000
Labor 390,000
Variable overhead 180,000
Fixed overhead 390,000
Total $1,460,000
e) Budgets are financial tools to forecast an entity's projections for sales, production, expenses, and cash balances. They help to anticipate developments ahead of time in order to plan for them and to prepare for unanticipated occurrences.
