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
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 $662,000 for product JB 50 and $361,000 for product JB 60, and administrative expenses of $541,000 for product JB 50 and $345,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

Product
JB 50

Product
JB 60

Sales budget:     Anticipated volume in units 403,400 201,800     Unit selling price $22 $27 Production budget:     Desired ending finished goods units 27,500 17,200     Beginning finished goods units 32,800 13,800 Direct materials budget:     Direct materials per unit (pounds) 2 3     Desired ending direct materials pounds 31,100 17,800     Beginning direct materials pounds 42,600 12,000     Cost per pound $2 $3 Direct labor budget:     Direct labor time per unit 0.3 0.6     Direct labor rate per hour $10 $10 Budgeted income statement:     Total unit cost $13 $22

Explanation / Answer

1 JB 50 JB 60 Total Expected units sales 403400 201800 Unit selling price 22 27 Total sales 8874800 5448600 14323400 2 Production budget JB 50 JB 60 Budgeted sales 4,03,400 201800 Add Ending inventory 27500 17200 Total needs 4,30,900 2,19,000 Less beginning inventory 32800 13800 Units to be produced 3,98,100 2,05,200 3 Direct material budget JB 50 JB 60 Number of units produced 3,98,100 2,05,200 Basis of units 2 3 Production needs 7,96,200 6,15,600 Add ending material inventory 31100 17800 Total material requirements 827300 633400 Less beginning material inventory 42600 12000 Material to be purchased 784700 621400 Material price per unit 2 3 Total cost of direct material purchases 1569400 1864200 4 direct labor budget JB 50 JB 60 Production budget units 3,98,100 2,05,200 Per unit direct hours required 0.3 0.6 Total labor hours needed 119430 123120 Labor price per hour 10 10 Labor dollars 1194300 1231200 Income statement JB 50 JB 60 Total Sales revenue 8874800 5448600 14323400 less Cost of goods sold 5244200 4439600 9683800 Gross profit 3630600 1009000 4639600 Operating expense Selling expense 662000 361000 1023000 Admin expense 541000 345000 886000 Total expense 1203000 706000 1909000 Operating profit 2427600 303000 2730600 Interest expense 150000 Income before tax 2580600 Income tax expense 30% 774180 (2580600*30%) Net income 1806420

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