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, 2017. 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 $661,000 for product JB 50 and $363,000 for product JB 60, and administrative expenses of $545,000 for product JB 50 and $343,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

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

Sales budget:     Anticipated volume in units 402,500 202,500     Unit selling price $23 $28 Production budget:     Desired ending finished goods units 30,000 16,000     Beginning finished goods units 33,500 13,800 Direct materials budget:     Direct materials per unit (pounds) 1 3     Desired ending direct materials pounds 32,700 18,900     Beginning direct materials pounds 43,300 14,200     Cost per pound $3 $4 Direct labor budget:     Direct labor time per unit 0.3 0.6     Direct labor rate per hour $12 $12 Budgeted income statement:     Total unit cost $12 $21

Explanation / Answer

JB 50 JB 60 Sales volume in units 4,02,500 2,02,500 Add: Closing inventory of finished goods 30,000 16,000 Less: Opening inventory of finished goods 33,500 13,800 Production units 3,99,000 2,04,700 Direct material cost per unit Direct materials per unit (pounds)* Cost per pound 1*3 3*4 Direct material cost per unit 3 12 Direct material cost of goods sold 3*402500 12*202500 Direct material cost of goods sold 12,07,500 24,30,000 Direct labour cost per unit Direct labor time per unit*Direct labor rate per hour 0.3*12 0.6*12 Direct labour cost per unit 4 7 Direct labour cost of goods sold 3.6*402500 7.2*202500 Direct labour cost of goods sold 14,49,000 14,58,000 Total Unit Cost 12 21 Less: Direct material cost per unit 3 12 Less: Direct labour cost per unit 4 7 Manufaturing Overheads per unit 5 2 Manufacturing Overheads cost of goods sold 5.4* 402500 1.8*202500 Manufacturing Overheads cost of goods sold 21,73,500 3,64,500 Income Statement JB 50 JB 60 Sales 92,57,500 56,70,000 (402500*23              202500*28) Less Direct material cost of goods sold 12,07,500 24,30,000 Less Direct labour cost of goods sold 14,49,000 14,58,000 Less Manufacturing Overheads cost of goods sold 21,73,500 3,64,500 Gross Profit 44,27,500 14,17,500 Less Selling Expenses 6,61,000 3,63,000 Net Profit before interest and tax 37,66,500 10,54,500 Total Net Profit before interest and tax 48,21,000 Less:Interest 1,50,000 Profit before tax 46,71,000 Less:Tax 30% 14,01,300 Profit after tax 32,69,700

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