Mastery Problem: Budgeting Learn Co Learn Co 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, 2011, and is planning for 2012, 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 2012 budgets, Sales Budget The sales budget often uses the prior year's 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. LearCo has completed reviewing its prior year's sales and has prepared the following sales budget After reviewing Learnco's sales budget, you note that three numbers have been omitted. The company's 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. LearnCo Sales Budget For the Year Ending December 31, 2012 Unit Sales Unit Selling Total Product Volume Price Sales Basic Abacus $8 $288.000 Deluxe Abacus 432,000 $720,000 Totals 72,000 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 rou 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 LearnCo Production Budget For the Year Ending December 31, 2012 Units Basic Units Deluxe Expected units to be sold (from Sales Budget) Desired ending inventory, December 31, 2012 1,000 3,000 Total units available Estimated beginning inventory, January 1, 2012 (1,050) (2,100) Total unts 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. 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, Wood Pieces Beads 1 2 N 3 Packages required per unit: Basic abacus Deluxe abacus Cost per package: Wood pieces Beads Units to be produced (from Production Budget): Basic abacus $0.25 $0.25 Deluxe abacus Learn Co Direct Materials Purchases Budget For the Year Ending December 31, 20Y2, Direct Materials Wood Pieces Beads Packages required for production: Total Basic abacus Deluxe abacus Desired inventory, December 31, 20Y2 2,200 5,000 Total packages available (3,500) (4,500) Estimated inventory, January 1, 2012 Total packages to be purchased X Unit price (per package) X $ Total direct materials to be purchased $72,888 $19 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 Assembly 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 Hours required for production: Basic abacus Deluxe abacus Total Hourly rate X $ Total direct labor cost $ Total $303,230 LearnCo Factory Overhead Cost Budget For the Year Ending December 31, 2012 Indirect factory wages $5,400 Power and light Depreciation of plant and equipment 1,450 Total factory overhead cost $18,100