Problem 21-2A (Part Level Submission) Deleon Inc. is preparing its annual budget

Question

Problem 21-2A (Part Level Submission)

Deleon Inc. is preparing its annual budgets for the year ending December 31, 2017. Accounting assistants furnish the data shown below.

Product
JB 50

Product
JB 60

An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of $661,000 for product JB 50 and $361,000 for product JB 60, and administrative expenses of $545,000 for product JB 50 and $344,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

Prepare the budgeted multiple-step income statement for the year. (Note: income taxes are not allocated to the products).

Product
JB 50

Product
JB 60

Sales budget:     Anticipated volume in units 402,300 203,700     Unit selling price $23 $27 Production budget:     Desired ending finished goods units 28,100 18,100     Beginning finished goods units 34,100 12,500 Direct materials budget:     Direct materials per unit (pounds) 1 3     Desired ending direct materials pounds 34,000 18,500     Beginning direct materials pounds 44,600 13,400     Cost per pound $3 $3 Direct labor budget:     Direct labor time per unit 0.4 0.6     Direct labor rate per hour $12 $12 Budgeted income statement:     Total unit cost $14 $22

Explanation / Answer

Budgeted income statement for the year Amount Sales Revenue $14,752,800 Less: Cost of goods sold $10,113,600 Gross Profit $4,639,200 Operating Expenses Selling expenses $1,022,000 Administrative expenses $889,000 Total operating expenses $1,911,000 Operating Profit $2,728,200 Non-operating expenses Interest expense $150,000 Income before taxes $2,578,200 Tax @30% $773,460 Net Income $1,804,740 Working note: Sales revenue Product JB 50 Product JB 60 Total Units of sales 402300 203700 Unit selling price $23 $27 Sales revenue $9,252,900 $5,499,900 $14,752,800 Cos of goods sold Product JB 50 Product JB 60 Total Units of sales 402300 203700 Total unit cost $14 $22 Sales revenue $5,632,200 $4,481,400 $10,113,600 Product JB 50 Product JB 60 Total Selling expenses $661,000 $361,000 $1,022,000 Adminitrative expenses $545,000 $344,000 $889,000

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