Deleon Inc. is preparing its annual budgets for the year ending December 31, 201

Question

Deleon Inc. is preparing its annual budgets for the year ending December 31, 2014. 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 $664,100 for product JB 50 and $363,300 for product JB 60, and administrative expenses of $544,600 for product JB 50 and $342,000 for product JB 60. Income taxes are expected to be 30%.

Product
JB 50

Product
JB 60

Sales budget:     Anticipated volume in units 402,200 203,400     Unit selling price $22 $27 Production budget:     Desired ending finished goods units 28,500 16,800     Beginning finished goods units 32,500 12,700 Direct materials budget:     Direct materials per unit (pounds) 1 2     Desired ending direct materials pounds 33,700 19,200     Beginning direct materials pounds 42,000 14,300     Cost per pound $3 $3 Direct labor budget:     Direct labor time per unit 0.4 0.5     Direct labor rate per hour $10 $10 Budgeted income statement:     Total unit cost $12 $21

Explanation / Answer

Solution:

Sales budget JB 50 JB 60 Total Expected unit sales 402200.00 203400 Unit selling price $                                                                22.00 $                                                     27.00 Total sales $                                                 88,48,400.00 $                                      54,91,800.00 $                                   1,43,40,200.00 Production Budget JB 50 JB 60 Total Expected unit sales 402200 203400 Desired ending finished good units 28500 16800 Total required units 430700 220200 Beginning finished goods units 32500 12700 Required production units 398200 207500 605700 Direct material Budget JB 50 JB 60 Total units to be produced 398200 207500 Direct materials per unit 1 2 Total pounds needed for production 398200 415000 Desired ending direct material 33700 19200 Total materials required 431900 434200 Beginning direct material 42000 14300 Direct material purchase 389900 419900 Cost per pound $                                                                  3.00 $                                                       3.00 Total cost of direct material purchase $                                                 11,69,700.00 $                                      12,59,700.00 $                                      24,29,400.00 Direct labour Budget JB 50 JB 60 total Units to be produced 398200 207500 Direct labour time(hrs) per unit 0.4 0.5 Total required direct labor hours 159280 103750 Direct labor cost per hour $                                                                10.00 $                                                     10.00 Total direct labor cost $                                                 15,92,800.00 $                                      10,37,500.00 $                                      26,30,300.00 Budgeted income statement JB 50 JB 60 Total sales $                                                 88,48,400.00 $                                      54,91,800.00 $                                   1,43,40,200.00 Expected sales units 402200 203400 Total unit cost $                                                                12.00 $                                                     21.00 Cost of goods sold $                                                 48,26,400.00 $                                      42,71,400.00 Gross profit $                                                 40,22,000.00 $                                      12,20,400.00 Selling expenses $                                                    6,64,100.00 $                                         3,63,300.00 $                                      10,27,400.00 Administrative expenses $                                                    5,44,600.00 $                                         3,42,000.00 $                                         8,86,600.00 Total operating expenses $                                                 12,08,700.00 $                                         7,05,300.00 $                                      19,14,000.00 income before taxes $                                                 28,13,300.00 $                                         5,15,100.00 $                                      33,28,400.00 tax rate 30% Income tax expense $                                         9,98,520.00 Net income $                                         9,15,480.00

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