Direct Labor Cost Budget Direct labor needs from the direct labor cost budget should be coordinated between the production and personnel departments so that there will be enough labor available for production. Before you make any changes to the budget, you review the information on the following Direct Labor Data Table and enter the units to be produced from the Production Budget. After scanning the Direct Labor Cost Budget (which follows the Direct Labor Data Table), you observe that LearnCo has omitted quite a few numbers from the budget. Fill in the missing amounts. You may need to use numbers from the Direct Labor Data Table, or from the sales budget, production budget, and direct materials purchases budget you prepared. When required, round your answers to the nearest dollar. Direct Labor Data Table Gluing Assembly Hours required per unit: Basic abacus 0.10 0.10 Deluxe abacus 0.10 0.20 Labor hourly rate: Gluing $12 Assembly $18 Units to be produced (from Production Budget): Basic abacus 3,595 X Deluxe abacus 3,690 X Learn Co Direct Labor Cost Budget For the Year Ending December 31, 20Y2 Learn Co Direct Labor Cost Budget For the Year Ending December 31, 20Y2 Gluing Assembly Total Hours required for production: Basic abacus 3,595 3,595 Deluxe abacus 3,690 7,380 Total 7,285 10,975 Hourly rate X $ 11 X $ 19 Total direct labor cost $ 80,135 x $ 208,525 x $284,970 Feedback Check My Work Review an example of the direct labor cost budget, and the computations for each part of the budget. You will need to use the information on the Direct Labor Data Table in your computations. Factory Overhead Cost Budget The factory overhead cost budget should be integrated with the production budget to ensure that production is not interrupted during the year. This budget may be supported by departmental schedules, which normally separate factory overhead costs into fixed and variable costs so that department managers may monitor and evaluate costs during the year. For simplicity, LearnCo has not separated costs in this manner. After reviewing the following factory overhead cost budget, you note that LearnCo has completed the budget with the exception of one amount. Fill in the missing amount. 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 72,888 Cost of direct materials available for use 73,888 X Direct materials inventory, December 31, 2012 (1,800) Cost of direct materials placed in production 73,088 Direct labor 288,660 x Factory overhead 18,100 Total manufacturing costs 379,848 X Total work in process during period 381,858 X Work in process inventory, December 31, 20Y2 (1,250) Cost of goods manufactured 380,608 x Cost of finished goods available for sale $ 390,478 X Finished goods inventory, December 31, 2012 (1,500) Cost of goods sold $ 388,978 X 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 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 Learn Co's income tax rate 40% Learn Co Budgeted Income Statement For the Year Ending December 31, 20Y2 Revenue from sales $ 720,000 Cost of goods sold 388,978 X Gross profit 331,022 X Selling and administrative expenses: Selling expenses 65,400 Administrative expenses 154,000 Total selling and administrative expenses 219,400 Operating income $ 111,622 X Other revenue and expense: Other revenue and expense: Interest revenue $ 2,000 Interest expense 1,500 500 Income before income tax 112,122 X Income tax 44,849 X Net income 67,273 X Feedback Check My Work Put together information from the Budgeted Income Statement Data Table, along with data from all the prior budgets that have been created. Don't 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 LearnCo's income before income tax? For simplicity, ignore any change in Cost of Goods Sold. a. If LearnCo sells zero Deluxe Abacus units in 2022, 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. 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 LearnCo's 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 LearnCo's 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. Learn Co's controller believes that the company can decrease its selling expenses by 10% and its administrative expenses by 15%. How muc would income before income tax increase if these expense cuts are implemented? Round your answer to the nearest dollar. $ 141,763 X