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, 2013. Accounting assistants furnish the data shown below.

An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of $660,000 for product JB 50 and $360,000 for product JB 60, and administrative expenses of $540,000 for product JB 50 and $340,000 for product JB 60. Income taxes are expected to be 30%.

Prepare the icome statement budgets for the year.

Product
JB 50 Product
JB 60 Sales budget:     Anticipated volume in units 400,000 200,000     Unit selling price $20 $25 Production budget:     Desired ending finished goods units 25,000 15,000     Beginning finished goods units 30,000 10,000 Direct materials budget:     Direct materials per unit (pounds) 2 3     Desired ending direct materials pounds 30,000 15,000     Beginning direct materials pounds 40,000 10,000     Cost per pound $3 $4 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 $12 $21

Explanation / Answer

Units Produced JB 50 JB 60 Total Sales 400,000 200,000 600,000 Closing Units 25,000 15,000 40,000 Total 425,000 215,000 640,000 Less : Opening Units (30,000) (10,000) (40,000) Units to be Produced 395,000 205,000 600,000 Direct Materials Consumed (Units to be Produced) X (Direct Materials per unit) 790,000 615,000 1,405,000 Closing Stock of Direct Materials 30,000 15,000 45,000 Total 820,000 630,000 1,450,000 Less : Opening Stock of Direct Materials (40,000) (10,000) (50,000) Direct Materials Purchased (Pound) 780,000 620,000 1,400,000 Cost per Pound 3 4 Total Cost of Purchase 2,340,000 2,480,000 4,820,000 Direct Labour Direct Labour Time per Unit 0.40 0.60 Total Direct Labour Time (in Hours) 158,000 123,000 281,000 Direct Labour Rate per Hour 12 12 Total Direct Labour Cost 1,896,000 1,476,000 3,372,000 Materials Purchased $2,340,000 $2,480,000 $4,820,000 Direct Labour Cost $1,896,000 $1,476,000 $3,372,000 Total Cost $4,236,000 $3,956,000 $8,192,000 Units to be Produced 395,000 205,000 600,000 Cost per Unit $11 $19 Units Sold 400,000 200,000 $600,000 Cost of Goods Sold $4,289,620 $3,859,512 $8,149,132

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