Operating Budget
Create an operating budget for the first quarter of a new business.
Projected Sales are:
Month #1: $65,000
Month #2: $97,500
Month #3: $130,000
Month #4: $110,500
These sales are based on selling one product with a selling price of $6.50
Create a Production Budget based on Units (not dollars).
· Desired Finished Goods Ending Inventory each month is 10% of the next month’s projected sales. (Use the Finished Goods Ending Inventory amount for the previous year for the Beginning Finished Goods Inventory to start this year).
Create a Direct Materials Purchase Budget
· Each unit produced requires 10# of direct materials at a cost of $0.08 per pound.
· Desired Ending Direct Materials Inventory is 10% of the next month’s material requirements.
Create a Direct Labor Budget
· Direct Labor Costs are $15/hour
· Each unit requires 5 minutes of labor
Create an Overhead Budget
· Variable Overhead Expenses are:
o Supplies ($.02 per unit)
o Inspection ($.10 per unit)
o Maintenance and Repair ($.03 per unit)
o Utilities ($.01 per unit)
· Fixed Overhead Expenses are $1100 monthly.
Create a Selling and Administrative Budget
· Variable Selling & Administrative Expenses are:
o Sales Commissions ($.03 per unit)
o Delivery ($.01 per unit)
o Office Support ($.02 per unit)
· Fixed Selling & Administrative Expenses are $2500 monthly.
Combine all Budgets to Create a Budgeted Income Statement
Complete a Budgeted Income Statement for months 1 through 3, and a Budgeted Income Statement that reflects the total first quarter.