Mastery Problem: Budgeting

LearnCo

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.

Mastery Problem: Budgeting LearnCo LearnCo manufactures and sells one product, an abacus for classroom use, with the models, the Beste model and the Deluxe model. The company began operat ons 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 unista 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 asts, and in creating a budgeted income statement showing prediction of net income for 2012 You have been asked to assist the controller of LeamCo in preparing the 2012 budgets. Sales Budget The sales budget often uses the prior year's sales as a starting point, and the sales quantities are revised for various factors such as planned advertising and promotion, projected pricing tanges, and expected industry and general economic conditions. Learn has completed reviewing its prior year's sales and has prepared the following sales budget After reviewing Lemos's sales budget, you come that three numbers have been omitted. The company's controller has told you that the units sald for the Basic and Deluxe mecals 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 $7 S252.000 Deluxe Abacus 468,000 Totals 72,000 5720.000 Production Budget The production budget should be integrated with the sales budget to ensure the production and sales are kept in balance during the year. The production budget estimates the number of urits to be manufactured to meet budgeted sales and desred inventory levels You note that Leemoo has emitted six numbers from the following procuction 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, 20Y2 Units Basic Units Deluxe Expected units to be soll (from Sales Budget) Desired anding inventary, December 31, 2012 1,000 3,000 Total unts available Estiramed beginning invertory, 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 budges to ensure that production is not interrupted during the year. Before you make any changes to the badyet, you review the function on the following Direct Materials De Table and enter the units to be produced from the Production Backyet. After scarming the direct materials purchases budget (which flows the Direct Meterials Data Table), you cbserve that Lesmo tas omittec 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 dolar. Direct Materials Data Table Wood Pieces Beads Packages required per unit: Basic abscus 1 1 2 Deluxenbacus 2 Cost per package: Wood places $0.25 Renus $0.25 units to be produced from Production Budget): Basic Abacus Deluxe abacus Learnco Direct Materials Purchases Budget For the Year Ending December 31, 2012 Direct Materials Wood Pieces Bendl Total Packages required for production Basic abacus Deluxe abacus Desired inventory, December 31, 2012 2,200 5.000 Total packages available 100,000 (3,500) 14,500) Estimated entory, January 1, 2012 Total packages to be purchased Unit price per package x Tulaire materials to chased si $72,699 Direct Labor Cost Budget Direct labur needs from the direct laber Cast get should be coordinated between the production and personnel departments so that there will be enough labor svalobe 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 Frucuction Budget. After scanning the Direct Labor Cost Budget (which follows the Direct Labor Data Table), you cbserve that Leart hiss omitted quite a few numbers from the budget. Fill in the messing 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 Direct Labor Data Table Gluing Assembly 0.10 0.10 0.10 U. 20 Heurs required per unit: Basic abacus Deluxe sbagus Labor hourly rate: Gluing Assembly Units to be produced (fram Production Budget): $13 $11 Basic abacus Deluxe LearnCo Direct Labor Cost Budget For the Year Ending December 31, 2012 Gluing Assembly Hours recuined for production: Basic abacus Total Deluxe Toni Hourly rate $ XS Total direct labor cast $1 $292,255 After rewewing the following rectory overhead cost budget, you note that Learno has competed 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 wees $5,400 Power and light Depreciation of plant and cubren 1,450 Tatal factory overned cast $18,100 Cost of Goods Sold Budget The cost of goods soic budget Integrates the direct materiais purchases budget, direct labor cost budget and factory overhcac 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 coaration of the cost of goods sold budget for Loco, using Information that follows provided by the controller, and using the previous budgets you have prepared Learco Cost of Goods Sold Budget For the Year Ending December 31, 2012 Finished goods inventory, January 1, 2012 $9,970 Work in Press entry.uary 1, 2012 $2,010 Direct materiais: Direct mater as inventory, January 1, 2012 $2,000 Direct mater purchases Cast of direct materias available for la Direct mater as inventory, December 31, 2012 (1 800) Cost of direct materiais paced in production Direct labor Factory overhead Tatal manufacturing casts Total work in process during period Work in process memory, December 31, 2012 (1.290) Gent al goods manufactured Cost of finished goods availabic for sale Finished goods inventory, December 31, 2012 Cost of goods sold LD 11,500) Selling/Admin. Expenses Budget The sales budget is often used as the starting point for the selling and administrative expenses bucet. For cample, a budgetechnorcase in ssies may require more advertising expense. Leart.Co has prepared its selling and acministrative experses budget as follows. This budget is mcrcly reviewed by you for use on the budgeted Incora statement LC Selling and Administrative Expenses Budget For the Year Ending December 31, 20Y2 Seling expenses: Salas startas en Danse $45,000 $ Advertising expen 15,000 Travel expense 5.400 ho Total seling expenses 565,100 Administrative expenses: : orcers' salaries experse $85,000 Office salaries expense 35,000 Office rent experse 20,000 orice suppilas sense 6,400 Hisallatus | 1.600 martie - Total administrasive experses 154,000 Total seling and $219,400 administrative expenses Budgeted Income Statement The budgeted Income statement is prepared by integrating the sales budget, cost of oods sold budget, and selling and administrative expenses budcat. Acciitional information that may be helpful in preparing the budgeted Income statement are on the following Eudosted Income Statement Data Table Row the Buyeteme St Date Take the complete texted me alement that follows the table. Round the complement for income tax to the real whole daler Budgeted Income Statement Data Table Interest revenue for the year $2,000 Interest expense for the year $1,500 Learnto's income tax rate LearnCo Budgeted Income Statement For the Year Ending December 31, 20Y2 Revenue from sales $ Cost of goods sold Gross profit Selling and administrative expenses: 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