Question
Direct Materials Purchases Budget The direct materials purchases budget should be integrated with the production budget to ensure that production is not interrupted during the
Direct Materials Purchases Budget
The direct materials purchases budget should be integrated with the production budget to ensure that production is not interrupted during the year.
Before you make any changes to the budget, you review the information on the following Direct Materials Data Table and enter the units to be produced from the Production Budget. After scanning the direct materials purchases budget (which follows the Direct Materials 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 Materials Data Table, or from the sales budget and production budget you prepared. When required, round your answers to the nearest dollar.
Direct Materials Data Table | ||
Wood Pieces | Beads | |
Packages required per unit: | ||
Basic abacus | 1 | 2 |
Deluxe abacus | 2 | 3 |
Cost per package: | ||
Wood pieces | $0.20 | |
Beads | $0.20 | |
Units to be produced (from Production Budget): | ||
Basic abacus | ||
Deluxe abacus |
LearnCo Direct Materials Purchases Budget For the Year Ending December 31, 20Y2 | |||
Direct Materials | |||
Wood Pieces | Beads | Total | |
Packages required for production: | |||
Basic abacus | |||
Deluxe abacus | |||
Desired inventory, December 31, 20Y2 | 2,200 | 5,000 | |
Total packages available | |||
Estimated inventory, January 1, 20Y2 | (3,500) | (4,500) | |
Total packages to be purchased | |||
Unit price (per package) | |||
Total direct materials to be purchased | $58,310 |
Feedback
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 | $11 | |
Assembly | $18 | |
Units to be produced (from Production Budget): | ||
Basic abacus | ||
Deluxe abacus |
LearnCo Direct Labor Cost Budget For the Year Ending December 31, 20Y2 | |||
Gluing | Assembly | Total | |
Hours required for production: | |||
Basic abacus | |||
Deluxe abacus | |||
Total | |||
Hourly rate | |||
Total direct labor cost | $277,685 |
Feedback
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 Factory Overhead Cost Budget For the Year Ending December 31, 20Y2 | |
Indirect factory wages | $5,400 |
Power and light | |
Depreciation of plant and equipment | 1,450 |
Total factory overhead cost | $18,100 |
Feedback
You can back into the missing number by computing from the total along with the other two values.
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 | $1,600 | ||
Direct materials purchases | |||
Cost of direct materials available for use | |||
Direct materials inventory, December 31, 20Y2 | (1,440) | ||
Cost of direct materials placed in production | |||
Direct labor | |||
Factory overhead | |||
Total manufacturing costs | |||
Total work in process during period | |||
Work in process inventory, December 31, 20Y2 | (1,250) | ||
Cost of goods manufactured | |||
Cost of finished goods available for sale | |||
Finished goods inventory, December 31, 20Y2 | (1,500) | ||
Cost of goods sold |
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% |
Budgeted Income Statement For the Year Ending December 31, 20Y2 | ||
Revenue from sales | ||
Selling expenses | ||
Administrative expenses | ||
Total selling and administrative expenses | ||
Operating income | ||
Other revenue and expense: | ||
Interest revenue | ||
Interest expense | ||
Income before income tax | ||
Income tax | ||
Net income |
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