DuraBlend First Aid Started Operations on January 1, 2014 $$\begin{array} { l l } \text { January } & 6,000 \\\text { February } & 8,000 \\\text { March } & 7,000 \\\text { April } & 9,000\end{array}$$

question 42

Multiple Choice

DuraBlend First Aid started operations on January 1, 2014. On that date, the only assets were cash of $13,000, and inventory of $600 consisting of direct materials. The company sells first aid kits for $18 each. Additional information concerning the company's operations follows:
.Variable costs of production are $5 for each kit consisting of direct materials of $2.00, direct labor totaling $1.80, and $1.20 per unit in variable overhead.
.Other expenses include $1 per first aid kit in variable selling expenses, $22,000 per month in fixed production costs, and $14,000 per month in fixed selling and administration costs.
.Sales are collected 40% in the month of sales and 60% in the month after the sale.
.All expenses are paid in the month they are incurred except materials that are paid in the month following purchase.
.The company plans its ending inventory of first aid kits to be 20% of the units to be sold during the next month. Direct material inventory is budgeted to be equal to 10% of the next month's production requirements.
.Sales in units are forecasted as follows: $$\begin{array} { l l } \text { January } & 6,000 \\\text { February } & 8,000 \\\text { March } & 7,000 \\\text { April } & 9,000\end{array}$$
What is the budgeted net income using the contribution format for February?

• A) $66,000
• B) $60,000
• C) $68,000
• D) None of the answer choices are correct.

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Definitions:

Financial Statement

Reports that provide information about a company's financial condition, performance, and cash flows, including balance sheets, income statements, and more.

Permanent/Temporary

Classification of accounts; permanent accounts are balance sheet accounts that carry their ending balances into the next accounting period, while temporary accounts are closed and zeroed out at the end of each period.

Normal Balance

The side (debit or credit) on which increases are recorded in an account, based on the type of account.

Financial Statement

Reports that present the financial performance, position, and cash flows of a business for a specified period.