LearnCo
Sales Budget
For the Year Ending December 31, 20Y2
Product	Unit Sales Volume	Unit Selling Price	Total Sales
Basic Abacus		$8.00	$288,000
Deluxe Abacus			432,000
Totals	72,000		$720,000

LearnCo
Production Budget
For the Year Ending December 31, 20Y2
	Units Basic	Units Deluxe
Expected units to be sold (from Sales Budget)
Plus desired ending inventory, December 31, 20Y2	1,000	3,000
Total units required
Less estimated beginning inventory, January 1, 20Y2	1,050	2,100
Total units to be produced

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
Plus desired ending inventory, December 31, 20Y2	2,200	5,000
Total packages required
Less estimated beginning inventory, January 1, 20Y2	3,500	4,500
Total packages to be purchased
Unit price (per package)	x	x
Total direct materials to be purchased			$58,310

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	$13.00
Assembly	$19.00
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 hours required
Hourly rate	x	x
Total direct labor cost			$303,230

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

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	$
Less 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		$
Less work in process inventory, December 31, 20Y2		1,250
Cost of goods manufactured
Cost of finished goods available for sale			$
Less finished goods inventory, December 31, 20Y2			1,500
Cost of goods sold			$

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 Data Table
Interest revenue for the year	$2,000
Interest expense for the year	$1,500
LearnCos income tax rate	40%

LearnCo

Budgeted Income Statement

For the Year Ending December 31, 20Y2

1	Revenue from sales
2	Cost of goods sold
3	Gross profit
4	Selling and administrative expenses:
5	Selling expenses
6	Administrative expenses
7	Total selling and administrative expenses
8	Income from operations
9	Other revenue and expense:
10	Interest revenue
11	Interest expense
12	Income before income tax
13	Income tax
14	Net income

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 LearnCos income before income tax? For simplicity, ignore any change in Cost of Goods Sold.

A)If LearnCo sells zero Deluxe Abacus units in 20Y2, 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.

C)LearnCo will still have positive income before income tax if it sells zero Deluxe Abacus units in 20Y2.

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 LearnCos 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 LearnCos income before income tax?

A)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).

B)LearnCo will still have positive income before income tax if Gluing labor costs increase to $15.00 per hour.

C)LearnCo will have a loss before income tax if Gluing labor costs increase to $15.00 per hour.

4. LearnCos controller believes that the company can decrease its selling expenses by 10% and its administrative expenses by 15%. How much would income before income tax increase if these expense cuts are implemented? Round your answer to the nearest dollar.