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Deleon Inc. is preparing its annual budgets for the year ending December 31, 2022. Accounting assistants furnish the following data. Product JB 50 Product JB

Deleon Inc. is preparing its annual budgets for the year ending December 31, 2022. Accounting assistants furnish the following data.

Product JB 50 Product JB 60
Sales budget:
Anticipated volume in units 400,000 200,000
Unit selling price $20 $25
Production budget:
Desired ending finished goods units 30,000 15,000
Beginning finished goods units 25,000 10,000
Direct materials budget:
Direct materials per unit (pounds) 2 3
Desired ending direct materials pounds 30,000 10,000
Beginning direct materials pounds 40,000 15,000
Cost per pound $3 $4
Direct labor budget:
Direct labor time per unit 0.4 0.6
Direct labor rate per hour $12 $12
Budgeted income statement:
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 20%.

Instructions

Prepare the following budgets for the year. Show data for each product. Quarterly budgets should not be prepared.

  1. Sales.

    a. Total sales $13,000,000

  2. Production.

    b. Required production units: JB 50, 405,000 JB 60, 205,000

  3. Direct materials.

    c. Total cost of direct materials purchases $4,840,000

  4. Direct labor.

    d. Total direct labor cost $3,420,000

  5. Multiple-step income statement (Note: income taxes are not allocated to the products).

    e. Net income $1,480,000

Prepare sales and production budgets and compute cost per unit under two plans.

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