LearnCo manufactures and sells one product, an abacus for classroom use, with two models, the Basic model and the Deluxe model. The company began operations on January 1, 20Y1, and is planning for 20Y2, its second year of operations, by preparing budgets from its master budget.

The company is trying to decide how many units to manufacture, how much it might spend on direct materials and direct labor, and what their factory overhead expenses might be. In addition, the company is interested in budgeting for selling and administrative costs, and in creating a budgeted income statement showing a prediction of net income for 20Y2.

You have been asked to assist the controller of LearnCo in preparing the 20Y2 budgets.

Sales Budget

The sales budget often uses the prior years sales as a starting point, and then sales quantities are revised for various factors such as planned advertising and promotion, projected pricing changes, and expected industry and general economic conditions. LearnCo has completed reviewing its prior years sales and has prepared the following sales budget.

After reviewing LearnCos sales budget, you note that three numbers have been omitted. The companys controller has told you that the units sold for the Basic and Deluxe models are expected to be the same. Fill in the missing amounts.

LearnCoSales BudgetFor the Year Ending December 31, 20Y2ProductUnit Sales VolumeUnit Selling PriceTotal SalesBasic Abacus $8$288,000Deluxe Abacus 432,000Totals72,000 $720,000

Production Budget

The production budget should be integrated with the sales budget to ensure that production and sales are kept in balance during the year. The production budget estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels.

You note that LearnCo has omitted six numbers from the following production budget and fill in the missing amounts. You may need to use numbers from the sales budget you prepared.

LearnCoProduction BudgetFor the Year Ending December 31, 20Y2 Units BasicUnits DeluxeExpected units to be sold (from Sales Budget) Desired ending inventory, December 31, 20Y21,0003,000Total units available Estimated beginning inventory, January 1, 20Y2(1,050)(2,100)Total units to be produced

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. This budget estimates the quantities of direct materials to be purchased to support budgeted production, along with desired inventory levels of direct materials.

Before you make any changes to the budget, you review the information in the following Direct Materials Data Table and enter the units to be produced from the Production Budget panel. 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 PiecesBeadsPackages required per unit: Basic abacus12Deluxe abacus23Cost per package: Wood pieces$0.25 Beads$0.25 Units to be produced (from Production Budget): Basic abacus Deluxe abacus LearnCoDirect Materials Purchases BudgetFor the Year Ending December 31, 20Y2 Direct Materials Wood PiecesBeadsTotalPackages required for production: Basic abacus Deluxe abacus Desired inventory, December 31, 20Y22,2005,000 Total packages available Estimated inventory, January 1, 20Y2(3,500)(4,500) Total packages to be purchased Unit price (per package)xx Total direct materials to be purchased $72,888

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 in the following Direct Labor Data Table and enter the units to be produced from the Production Budget panel. 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 GluingAssemblyHours required per unit: Basic abacus0.100.10Deluxe abacus0.100.20Labor hourly rate: Gluing$13.00 Assembly$19.00 Units to be produced (from Production Budget): Basic abacus Deluxe abacus LearnCoDirect Labor Cost BudgetFor the Year Ending December 31, 20Y2 GluingAssemblyTotalHours required for production: Basic abacus Deluxe abacus Total Hourly ratexx Total direct labor cost $303,230

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.

LearnCoFactory Overhead Cost BudgetFor the Year Ending December 31, 20Y2Indirect factory wages$5,400Power and light Depreciation of plant and equipment1,450Total factory overhead cost$18,100

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.

LearnCoCost of Goods Sold BudgetFor the Year Ending December 31, 20Y2Finished goods inventory, January 1, 20Y2 $9,870Work in process inventory, January 1, 20Y2 $2,010 Direct materials: Direct materials inventory, January 1, 20Y2$2,000 Direct materials purchases Cost of direct materials available for use$ Direct materials inventory, December 31, 20Y2(1,800) 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 in the budgeted income statement.

LearnCoSelling and Administrative Expenses BudgetFor the Year Ending December 31, 20Y2Selling expenses: Sales salaries expense$45,000 Advertising expense15,000 Travel expense5,400 Total selling expenses $65,400Administrative expenses: Officers' salaries expense$85,000 Office salaries expense35,000 Office rent expense26,000 Office supplies expense6,400 Miscellaneous administrative expenses1,600 Total administrative expenses 154,000Total 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 in 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. Enter all amounts as positive numbers.

Budgeted Income Statement Data Table Interest revenue for the year$2,000Interest expense for the year$1,500LearnCos income tax rate40%LearnCoBudgeted Income StatementFor the Year Ending December 31, 20Y21Revenue from sales 2Cost of goods sold 3Gross profit 4Selling and administrative expenses: 5Selling expenses 6Administrative expenses 7Total selling and administrative expenses 8Income from operations 9Other revenue and expense: 10Interest revenue 11Interest expense 12Income before income tax 13Income tax 14Net income