Deleon Inc. is preparing its annual budgets for the year ending December 31, 2022. Accounting assistants furnish
Question:
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.
- Sales.
a. Total sales $13,000,000
- Production.
b. Required production units: JB 50, 405,000 JB 60, 205,000
- Direct materials.
c. Total cost of direct materials purchases $4,840,000
- Direct labor.
d. Total direct labor cost $3,420,000
- 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.