The Jarrad Corporation's management team is getting ready to prepare its master budget for one its product lines for the year 2019. The company produces caramel lollipops which are basically cooked down sugar on a stick, a diabetics nightmare along with many other sweet treats.
Budgeted sales of the lollipops for each quarter of 2019 are as follows:
1st Quarter-12,500 cases , 2nd Quarter-14,000 cases , 3rd Quarter-25,500 cases , 4th Quarter-34,900 cases
There are 100 lollipops in a case and each sells for $200. Jarrad is budgeting a 5% sales price increase effective July 1,2019
The 4th Quarter 2018 sales have been budgeted at 32,000 cases and Jarrad wants to have an ending inventory carried over into 2019 of 2,000 cases.
At the end of 2019 they desire an ending inventory of 2,250 cases. Each quarter an additional 10% of that quarter's sales is to be produced as an ending inventoy to be carried over into the following quarter.
Budget amount of sales revenue for 2019:
1st Quarter $2,500,000 , 2nd Quarter $2,800,000 , 3rd Quarter $5,100,000 , 4th Quarter $6,980,000
Budget sales for 2019: $17,380,000
Cases of lollipop produced in 2019:
1st Quarter $1,175,000 , 2nd Quarter $1,415,000 , 3rd Quarter $2,665,000 , 4th Quarter $3,460,000
Budget cost of the sugar which is required to produce the total number of lollipops to be produced in 2019: $3,486,000
Budget cost of the chocolate which is required to produce the total number of lollipops budgeted in 2019: $305,025
Budget cost of the lollipop sticks which are required to produce the lollipop in 2019: $261,450
Budget direct labor hours required to produce the total number of cases of lollipops for 2019: $21,787.50
Budget direct labor cost for 2019: $239,662.50
Manufacturing Overhead Costs:
Budget amount of machine-maintenance and operational cost for 2019: $39,375
The other budgeted overhead costs include
Supervisors salaries are $40,000 per quarter (there are 2 plant supervisors)
Insurance on the factory-$22,700 annually
Rent on the warehouse-$2,000 per month
Quality Control Inspections-$5 per each case produced
Depreciation of factory equipment=$6,000 per year
Janitorial and Maintenance staff wages are budgeted at $15,000 per quarter
Total budget overhead cost for 2019: $44,047,075
Total budget manufacturing cost for the units to be produced in 2019: $48,339,212.50
Budget cost per unit to be produced: $5.55
Budget cost of goods to be sold in 2019: $4,695,162.5
Selling and Administrative Expenses:
Sales Salaries are budgeted at $50,000 per quarter
Sales Commissions are budgeted at 7% of sales
Advertising is budgeted at 5% of sales
Officers and Administrative Salaries are budgeted at $110,000 per quarter
Rent on the corporate and sales offices is $2,700 per month
Depreciation on selling and office furniture and equipment=$4,200 per year
Other corporate expenses are budgeted at $7,500 per quarter
Other Nonoperating Income, Expenses, Gains and Losses:
Jarrad has an outstanding banl loan of $500,000 and it pays 8% interest each year with the principal coming due in 2020.
Jarrad is planning to replace some outdated equipment which has an estimated residual value of $32,000 in 2019. Another cpompany has offered to purchase it for $45,000 in March after all depreciation will have been taken.
Jarrad budgets income taxes based on its income before taxes at the rate of 35%.
Question -What will be the total budgeted selling and administrative expenses of 2019? $................................
Question -What will be the budgeted Income from Operations for the Jarrad Corporation for 2019? $..............................
Total Budgeted Selling and administrative Expenses = $2,791,600
(A) Sales salaries = $50 000 x 4 = $200,000
(B) Sales Commission = 7% of $17,380,000 = $1,216,600
(C) Advertising = %% of $17,380,000 = $869,000
(D) Officers and administrative salaries = $110,000 x 4 = $440,000
(E) Rent on corporate and sales offices = $2,700 x 12 = $32,400
(F) Depreciation on selling and office furniture = $4,200
(G)Other Corporate expenses = 47,500 x 4 = $30,000
Total selling and administrative expenses = $2,791,600.
Income from operations = $10,493,237
| sales | 17980000 | |
| Cost of goods sold | 4695163 | |
| Gross Profit | 13284837 | |
| Selling and Administrative exp. | 2791600 | |
| Net operating income | 10493237 | |
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