Budget preparation

The management accountant at Lynton Ltd has been asked to prepare the companys annual budgets for the coming year. The company manufactures and sells two products (AB1 and XY2) and the following preliminary information has been collected:

Product Product

AB1 XY2

Sales budget:

Anticipated volume in units 450,000 200,000

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 2 kg 3 kg

Desired ending direct materials 30,000 kg 15,000 kg

Beginning direct materials 40,000 kg 10,000 kg

Cost per kg $3 $4

Direct labour budget:

Direct labour time per unit 0.4 hours 0.6 hours

Direct labour rate per hour $10 $10

Total unit cost $12 $20

Budgeted income statement:

An assistant has prepared the selling and administrative expense budget, which reveals:

Product Product

AB1 XY2

Selling expenses $660,000 $360,000

Administrative expenses $540,000 $340,000

Income taxes are expected to be 30 per cent of companys net profit (net income).

Requirements:

Prepare the following budgets for the coming year 2023.

(a) Sales (Marks 3)

(b) Production (Marks 3)

(c) Direct materials (Marks 5)

(d) Direct labour (Marks 5)

(e) Income statement (Marks 4)

Answer Format: