Cost of Goods Sold Budget The cost of goods sold budget integrates the direct materials purchases budget, direct labor cost budget, and factory overhead cost budget Estimated and desired inventories for direct materials, work in process, and finished goods must also be integrated into the cost of goods sold budget Complete the preparation of the cost of goods sold budget for LearnCo, using information that follows provided by the controller, and using the previous budgets you have prepared LearnCo Cost of Goods Sold Budget For the Year Ending December 31, 20Y2 Finished goods inventory, January 1, 20Y2 $9,870 Work in process inventory, January 1, 20Y2 $2,010 Direct materials Direct materials inventory, January 1, 20Y2 $2,000 Direct materials purchases fill in the blank 66f3c5ffbf8cffb 1 Cost of direct materials available for use $fill in the blank 66f3c5ffbf8cffb 2 Direct materials inventory, December 31, 20Y2 (1,800) Cost of direct materials placed in production $fill in the blank 66f3c5ffbf8cffb 3 Direct labor fill in the blank 66f3c5ffbf8cffb 4 Factory overhead fill in the blank 66f3c5ffbf8cffb 5 Total manufacturing costs fill in the blank 66f3c5ffbf8cffb 6 Total work in process during period $fill in the blank 66f3c5ffbf8cffb 7 Work in process inventory, December 31, 20Y2 (1,250) Cost of goods manufactured fill in the blank 66f3c5ffbf8cffb 8 Cost of finished goods available for sale $fill in the blank 66f3c5ffbf8cffb 9 Finished goods inventory, December 31, 20Y2 (1,500) Cost of goods sold $fill in the blank 66f3c5ffbf8cffb 10 Feedback Review the format and the flow of the cost of goods sold budget In particular, note amounts that come from prior budgets that have been prepared Selling Admin Expenses Budget The sales budget is often used as the starting point for the selling and administrative expenses budget For example, a budgeted increase in sales may require more advertising expenses LearnCo has prepared its selling and administrative expenses budget as follows This budget is merely reviewed by you for use on the budgeted income statement LearnCo Selling and Administrative Expenses Budget For the Year Ending December 31, 20Y2 Selling expenses Sales salaries expense $45,000 Advertising expense 15,000 Travel expense 5,400 Total selling expenses $65,400 Administrative expenses Officers' salaries expense $85,000 Office salaries expense 35,000 Office rent expense 26,000 Office supplies expense 6,400 Miscellaneous administrative expenses 1,600 Total administrative expenses 154,000 Total selling and administrative expenses $219,400 Budgeted Income Statement The budgeted income statement is prepared by integrating the sales budget, cost of goods sold budget, and selling and administrative expenses budget Additional information that may be helpful in preparing the budgeted income statement are on the following Budgeted Income Statement Data Table Review the Budgeted Income Statement Data Table, then complete the budgeted income statement that follows the table Round the computed amount for income tax to the nearest whole dollar Budgeted Income Statement Data Table Interest revenue for the year $2,000 Interest expense for the year $1,500 LearnCos income tax rate 40 LearnCo Budgeted Income Statement For the Year Ending December 31, 20Y2 Revenue from sales $fill in the blank 047f06fd1064056 1 Cost of goods sold fill in the blank 047f06fd1064056 2 Gross profit $fill in the blank 047f06fd1064056 3 Selling and administrative expenses Selling expenses $fill in the blank 047f06fd1064056 4 Administrative expenses fill in the blank 047f06fd1064056 5 Total selling and administrative expenses fill in the blank 047f06fd1064056 6 Operating income $fill in the blank 047f06fd1064056 7 Other revenue and expense Interest revenue $fill in the blank 047f06fd1064056 8 Interest expense fill in the blank 047f06fd1064056 9 fill in the blank 047f06fd1064056 10 Income before income tax $fill in the blank 047f06fd1064056 11 Income tax fill in the blank 047f06fd1064056 12 Net income $fill in the blank 047f06fd1064056 13 Feedback Put together information from the Budgeted Income Statement Data Table, along with data from all the prior budgets that have been created Dont forget to round the income tax amount to the nearest dollar Final Questions Budgeting affects the planning, directing, and controlling functions of management LearnCo wishes to determine the sensitivity of some of its budget values to changes in the economy Using the information on the completed budgets, answer the following questions Consider each question separately, assuming that all other data remains the same, including the level of production of each model 1 LearnCo believes that sales of the Deluxe Abacus model may decrease in 20Y2 If Deluxe abacus sales are zero, what will be the effect on LearnCos income before income tax For simplicity, ignore any change in Cost of Goods Sold a If LearnCo sells zero Deluxe Abacus units in 20Y2, it will break even (i e , the company will have zero income before income tax) b LearnCo will have a net loss before income tax if it sells zero Deluxe Abacus units in 20Y2 c LearnCo will still have positive income before income tax if it sells zero Deluxe Abacus units in 20Y2 b 2 LearnCo's vendor for bead packages is expected to double its price per package of beads If this occurs, what will be the effect on LearnCos income before income tax a If the price for bead packages doubles, LearnCo will break even (i e , the company will have zero income before income tax) b LearnCo will have a loss before income tax if the price for bead packages doubles c LearnCo will still have positive income before income tax if the price for bead packages doubles c 3 LearnCo is aware that its labor prices for the Gluing part of the manufacturing process may increase to $15 00 per hour due to changes in minimum wage laws in its state If this occurs, what will be the effect on LearnCos income before income tax a LearnCo will still have positive income before income tax if Gluing labor costs increase to $15 00 per hour b If Gluing labor costs increase to $15 00 per hour, LearnCo will break even (i e , the company will have zero income before income tax) c LearnCo will have a loss before income tax if Gluing labor costs increase to $15 00 per hour a 4 LearnCos controller believes that the company can decrease its selling expenses by 10 and its administrative expenses by 15 How much would income before income tax increase if these expense cuts are implemented Round your answer to the nearest dollar $fill in the blank 1785e6074fa6f97 4

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Cost of Goods Sold Budget The cost of goods sold budget integrates the direct materials purchases budget, direct labor cost budget, and factory overhead cost

Cost of Goods Sold Budget

The cost of goods sold budget integrates the direct materials purchases budget, direct labor cost budget, and factory overhead cost budget. Estimated and desired inventories for direct materials, work in process, and finished goods must also be integrated into the cost of goods sold budget.

Complete the preparation of the cost of goods sold budget for LearnCo, using information that follows provided by the controller, and using the previous budgets you have prepared.

LearnCo Cost of Goods Sold Budget For the Year Ending December 31, 20Y2
Finished goods inventory, January 1, 20Y2			$9,870
Work in process inventory, January 1, 20Y2		$2,010
Direct materials:
Direct materials inventory, January 1, 20Y2	$2,000
Direct materials purchases	fill in the blank 66f3c5ffbf8cffb_1
Cost of direct materials available for use	$fill in the blank 66f3c5ffbf8cffb_2
Direct materials inventory, December 31, 20Y2	(1,800)
Cost of direct materials placed in production	$fill in the blank 66f3c5ffbf8cffb_3
Direct labor	fill in the blank 66f3c5ffbf8cffb_4
Factory overhead	fill in the blank 66f3c5ffbf8cffb_5
Total manufacturing costs		fill in the blank 66f3c5ffbf8cffb_6
Total work in process during period		$fill in the blank 66f3c5ffbf8cffb_7
Work in process inventory, December 31, 20Y2		(1,250)
Cost of goods manufactured			fill in the blank 66f3c5ffbf8cffb_8
Cost of finished goods available for sale			$fill in the blank 66f3c5ffbf8cffb_9
Finished goods inventory, December 31, 20Y2			(1,500)
Cost of goods sold			$fill in the blank 66f3c5ffbf8cffb_10

Feedback

Review the format and the flow of the cost of goods sold budget. In particular, note amounts that come from prior budgets that have been prepared.

Selling/Admin. Expenses Budget

The sales budget is often used as the starting point for the selling and administrative expenses budget. For example, a budgeted increase in sales may require more advertising expenses. LearnCo has prepared its selling and administrative expenses budget as follows. This budget is merely reviewed by you for use on the budgeted income statement.

LearnCo Selling and Administrative Expenses Budget For the Year Ending December 31, 20Y2
Selling expenses:
Sales salaries expense	$45,000
Advertising expense	15,000
Travel expense	5,400
Total selling expenses		$65,400
Administrative expenses:
Officers' salaries expense	$85,000
Office salaries expense	35,000
Office rent expense	26,000
Office supplies expense	6,400
Miscellaneous administrative expenses	1,600
Total administrative expenses		154,000
Total selling and administrative expenses		$219,400

Budgeted Income Statement

The budgeted income statement is prepared by integrating the sales budget, cost of goods sold budget, and selling and administrative expenses budget. Additional information that may be helpful in preparing the budgeted income statement are on the following Budgeted Income Statement Data Table.

Review the Budgeted Income Statement Data Table, then complete the budgeted income statement that follows the table. Round the computed amount for income tax to the nearest whole dollar.

Budgeted Income Statement Data Table
Interest revenue for the year	$2,000
Interest expense for the year	$1,500
LearnCos income tax rate	40%

LearnCo Budgeted Income Statement For the Year Ending December 31, 20Y2
Revenue from sales		$fill in the blank 047f06fd1064056_1
Cost of goods sold		fill in the blank 047f06fd1064056_2
Gross profit		$fill in the blank 047f06fd1064056_3
Selling and administrative expenses:
Selling expenses	$fill in the blank 047f06fd1064056_4
Administrative expenses	fill in the blank 047f06fd1064056_5
Total selling and administrative expenses		fill in the blank 047f06fd1064056_6
Operating income		$fill in the blank 047f06fd1064056_7
Other revenue and expense:
Interest revenue	$fill in the blank 047f06fd1064056_8
Interest expense	fill in the blank 047f06fd1064056_9	fill in the blank 047f06fd1064056_10
Income before income tax		$fill in the blank 047f06fd1064056_11
Income tax		fill in the blank 047f06fd1064056_12
Net income		$fill in the blank 047f06fd1064056_13

Feedback

Put together information from the Budgeted Income Statement Data Table, along with data from all the prior budgets that have been created. Dont forget to round the income tax amount to the nearest dollar.

Final Questions

Budgeting affects the planning, directing, and controlling functions of management. LearnCo wishes to determine the sensitivity of some of its budget values to changes in the economy.

Using the information on the completed budgets, answer the following questions. Consider each question separately, assuming that all other data remains the same, including the level of production of each model.

1. LearnCo believes that sales of the Deluxe Abacus model may decrease in 20Y2. If Deluxe abacus sales are zero, what will be the effect on LearnCos income before income tax? For simplicity, ignore any change in Cost of Goods Sold.

a. If LearnCo sells zero Deluxe Abacus units in 20Y2, it will break even (i.e., the company will have zero income before income tax).

b. LearnCo will have a net loss before income tax if it sells zero Deluxe Abacus units in 20Y2.

c. LearnCo will still have positive income before income tax if it sells zero Deluxe Abacus units in 20Y2.

2. LearnCo's vendor for bead packages is expected to double its price per package of beads. If this occurs, what will be the effect on LearnCos income before income tax?

a. If the price for bead packages doubles, LearnCo will break even (i.e., the company will have zero income before income tax).

b. LearnCo will have a loss before income tax if the price for bead packages doubles.

c. LearnCo will still have positive income before income tax if the price for bead packages doubles.

3. LearnCo is aware that its labor prices for the Gluing part of the manufacturing process may increase to $15.00 per hour due to changes in minimum wage laws in its state. If this occurs, what will be the effect on LearnCos income before income tax?

a. LearnCo will still have positive income before income tax if Gluing labor costs increase to $15.00 per hour.

b. If Gluing labor costs increase to $15.00 per hour, LearnCo will break even (i.e., the company will have zero income before income tax).

c. LearnCo will have a loss before income tax if Gluing labor costs increase to $15.00 per hour.

4. LearnCos controller believes that the company can decrease its selling expenses by 10% and its administrative expenses by 15%. How much would income before income tax increase if these expense cuts are implemented? Round your answer to the nearest dollar.

$fill in the blank 1785e6074fa6f97_4