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 Product Product JB 50 JB 60 Sales budget Anticipated volume in units Unit selling price 400,000 200,000 $20 $25 Production budget: 15,000 Desired ending finished goods units Beginning finished goods units 30,000 25,000 10,000 Direct materials budget: Direct materials per unit (pounds) Desired ending direct materials pounds Beginning direct materials pounds Cost per pound 30,000 40,000 $3 10,000 15,000 Direct labor budget: Direct labor time per unit Direct labor rate per hour Budgeted income statement 0.6 $12 $12 Total unit cost $13 $20 An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of $560,000 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. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%

Explanation / Answer

Prepare direct material budget :

JB 50 JB 60 Total Production units 405000 205000 Direct material per units 2 3 Production needs 810000 615000 Add: desired ending inventory of direct material 30000 10000 Total needs 840000 625000 Less; Beginning inventory of direct material (40000) (15000) Direct material purchase 800000 610000 Price per pound 3 4 Direct material purchase cost 2400000 2440000 4840000

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