MBA C604 North American Manufacturing Company

Budgeted Income

Topic 1

The board of directors of North American Manufacturing Company recently approved the company’s budget and production plan for its coming fiscal year, 20X5.  Budgeted units of production equal budgeted unit sales for the company’s single product.  Using the information below, included in the budget and production plan:

  1. Compute the amount of required sales – number of units and dollars – necessary to achieve the company’s budgeted net income for its fiscal year ended (FYE) December 31, 20X5
  2. Prepare the company’s budgeted income statement for its FYE December 31, 20X5 using the Variable Costing Method (Contribution Margin Format).

Show all computations in good form and label properly all amounts presented.

Budgeted amounts: Budgeted amounts:Per unit
Sales units?Product selling price (SP)$210.00
Sales dollars?Variable manufacturing costs: 
Fixed costs: Direct materials (DM)$47.25
Manufacturing overhead (MOH) costs$2,100,000Direct labor (DL)$39.75
Selling and administrative (S&A) costs$2,250,000Manufacturing overhead (MOH) costs$55.50
Research and development (R&D) costs$1,500,000Variable selling and admin. (S&A) costs$22.50
Net income$1,890,000Estimated combined effective tax rate40.0% (i.e., 0.40)

A. Amount of required sales – number of units and dollars – necessary to achieve the company’s budgeted net income for its fiscal year ended (FYE) December 31, 20X5:

B. Prepare the company’s budgeted income statement for its FYE December 31, 20X5 using the Variable Costing Method (Contribution Margin Format)

North American Manufacturing Company
Budgeted Income Statement
Fiscal year ended December 31, 20X5
UnitsUnitsTotal
Sales $$
Vairable expenses:
Cost of goods sold$
$
Total Variable expenses$
$
$

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