Mastery Problem: Budgeting LearnCo Learnco manufactures and sells one product, an abacus for dassroom use, with two models, the Basic model and the Deluxe model. The company began operations on January 1, 201, and is planning for 2022. its second year of operations, by preparing budgets from its master budget. The company is trying to decide how many units to manufacture, how mach it might spend on direct materials and direct labor, and what their factory overhead expenses might be. In addition company is interested in budgeting for selling and administrative costs, and in creating a budgeted Income statement showing a prediction of not income for 2012 You have been asked to assist the controller of Luanco in preparing the 2017 budgets, Sales Budget The sales budget often uses the prior year's sales as a starting point, and then sales quantities are resised for various factors such as planned advertising and promotion, projected pricing chom and expected Industry and general economic conditions. Learno has completed reviewing its pelor wear's sales and has prepared the following sales budget. After reviewino Leamco's 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 expecte the same. Fill in the missing amounts Learnco Sales Budget For the Year Ending December 31, 2012 Unit Sales Unit Selling Product Volume Price Bad Abacus 36,000 37 Deline Abacos 36,000 13 Total Sales 5252.600 468.000 Trance Sales Budget For the Year Ending December 31, 2012 Unit Sales Unit Selling Product Volume Price Basic Abacus 36,000 Deluxe Abacus 36,000 Total Sales $257,000 468,000 3720,000 Totals 72.000 5 Production Budget The production budget should be integrated with the sales budget to ensure that production and sales are in balance during the the production budget estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels You note that Learno has omitted numbers from the following production budget and 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 sold (From Sales Budget 36,000 35,000 Desired ending inventary, December 31, 2012 1.000 3,000 Check My Work Units laske Units Deluxe 30,000 36,000 3,000 Expected units to be sold from sales out Desired ending inventory, December 31, 2012 Total units available Estimated beginning inventory, January 1, 2012 Total units to be produced 1.000 37,000 (1.050) 19,000 (2.100) 35,950 36,900 Be sure to indude the expected units to be sold for each model from the Sale get. Then review the preparation of the production budget and how the amounts are compte Blect Materials Purchases Budget Te direct berbudt 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 Material Data and enter the units to be produced from the production Budget. After scanning the direct mater purchaset budget (which follows the Direct Material Data Tables you see that comite cuite a few numbers from the budget. Fill in the missing amounts You may need numbers from the Direct Materials Data e or from the sales budget and production budget you prepared. When required, round your answers to the nearest dollar Direct Haterials Data Table Wood Pieces Beads Padages required per unit: WELCI Wood Pieces Beads Packages required per unit: Basic abacus 1 2 Deluxe abacus 2 3 Cost per package: Wood pieces $0.25 Beads $0.25 Units to be produced (from Production Budget): Basic abacus 35,950 Deluxe abacus 36,900 LearnCo Direct Materials Purchases Budget For the Year Ending December 31, 2012 Direct Materials Wood Pieces Beads Total Packages required for production: Basic abacus 35,9507 71,900 V Deluxe abacus 73,800 110,700 V Desired inventory, December 31 DAVO 2 200 5,000 lake Assignment takeAssignmentMain.do?invoker-takeAssignmentSessiontocator-&inpro Ea abacus 35,950 71.900 110,700 73,300 2.200 5,000 111.950 Defnabas Desired inventory, December 31. 2012 Total packages available Estimated Inventory, January 1, 2012 Total packages to be purchased Unit price (per package Total direct materials to be purchased 187,600 (3,500) 108,450 (4.500) 181,100 X OX 27.113 45.775 $72.888 Review an example of the direct materials purchases budget and the computation for each part of the budget. You will need to use the information on the Direct Materiais Data Table in your computations Direct Labor Cost Budget Director needs from the direct labor cost budou should be coordinated between the production and person departments so that there will be enough tabor valable for production Before you make changes to the budget, you are the information on the following Direct Labor Datable and enter the units to be produced from the Production Budget. After scanning the Direct Labor Cost Baptich follows the Direct Labor Data Tobiel, vou serve that are a few numbers from the budget. Fit in the missing amounts. You moed to use Check My Work LO 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 tabor valable for productions 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. Altar in the Direct Labor Cost Budget (which follows the Direct Labor Data Table) you observe that enco has omitted quite a few numbers from the budget in the missing amounts. You may need to 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 112 $19 Assembly Units to be produced (from Production Budget Basic abacus 35,950 Oecut 35,000 Learco Direct Labor Cost Budget Check My Work TH Budget): Basic abacus 35,950 Deluxe abacus 36,900 Learco Direct Labor Cost Budget For the Year Ending December 31, 2012 Gluing Assembly Hours nouired for production Basic abacus 3,595 3,595 Total Deluxe abacus 3,690 7,380 Total 7,285 10,975 Hourly rate 12 X 17 X 136,575 X 303,20 Total direct labor cost 57,420 X Factory Overhead Cost Budget Thermetido buto shold Integrated with the production construction is not interrupted during that this budou may be supported by departmental Scheduint, which commally separate factory overhead coats into feed and warable conto the department managers may nito and evaluate costs during the year. For simplicity, Leanco has not separated cotton this mannen HY W Scars manner After reviewing the following factory overhead cost budget, you note that Learco 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, 2012 Indirect factory wages 55,400 Power and light 11,250 Depreciation of plant and equipment 1.450 Total factory overhead cost $10,100 Cost of Goods Sold Budget The cold of good budget integrates the direct materials parcia budo, direct laber cost budget and factory overhead cont budget. Estimated and desired inventories for direct materials, work in process, and finished goods must also be integrated into the cost of old budget Complete the preparation of the cost of goods sold budget for Leamco ung formation that follows provided by the control, and in the previous budgets you have prepared Learnco Cost of Goods Sold Budget For the Year Ending December 31, 2012 39,870 Finished goods inventory, January 1, 2012 Wook in process inventory. January 1, 2012 $2.010 Check My War Complete the preparation of the cost of goods sold budget for Learco, using information that follows provided by the controller, and using the previous budget LearnCo Cost of Goods Sold Budget For the Year Ending December 31, 2022 Finished goods inventory, January 1, 2012 $9,870 Work in process inventory, January 1, 20Y2 $2,010 Direct materials: Direct materials inventory, January 1, 2012 $2,000 Direct materials purchases 72,888 Cost of direct materials available for use 74,888 Direct materials inventory, December 31, 2012 (1,800) Cost of direct materials placed in production 73,088 Direct labor 273,995 X Factory overhead 18,100 $ Total manufacturing costs 365,183 x 365,183 X Total work in process during period Work in process inventory, December 31, 20Y2 Cost of goods manufactured (1,250) 365,943 X Cost of finished goods available for sale 5 365,943 X en sessionLocatorenpro so 365,183 X (1.250) Total work in process during period Work in process inventory, December 31, 2012 Cost of goods manufactured Cost of finished goods available for sale Finished goods inventory, December 31, 2012 Cost of goods sold 365,943 x 365,941 X (1.500) 374,31X 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. Leamco has prepared its selling and administrative expenses budget as follows. The budget is endly reviewed by you for use on the budgeted income statement. Learnco Selling and Administrative Expenses Budget For the Year Ending December 31, 20Y2 Selia expenses Sales salaries expenses 545.000 Advertising experte 15.000 Travel expense 5,400 Total selling expenses $55,400 Check My Work Travel expense 5.400 Total selling expenses $65.400 Administrative pense Officers' salaries expen $85.000 Office sales expense 35,000 Officerent pense 26,000 Office supplies expense 0,400 Miscellaneous administrative expenses 1,600 Total administrative expenses 154,000 Total sailing and administrative expenses $219,400 Budgeted Income Statement The budgeted income statement is prepared by integrating the 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 Relew the Budgeted Income Statement Data Table, the complete the budgeted income statement that follows the table Round the computed amount for income tax to the nearest whole data Budgeted Income Statement Data Table Interest revenue for the year $2.000 Interspeise for the year $1.500 income tax rate 401 Learnco Budgeted Income Statement Learn Co's income tax rate 40% LearnCo Budgeted Income Statement For the Year Ending December 31, 2012 Revenue from sales 720,000 Cost of goods sold 374,313 X Gross profit 345,688 X Selling and administrative expenses: Selling expenses 58,860 X Administrative expenses 130,900 x 189,760 X Total selling and administrative expenses Operating income Other revenue and expense: Interest revenue Interest expense Income before income tax 156,428 X 62,571 X Income tax 93,857 X Net Income Net Income 93,052 X Final Questions Budgeting affects the planning, directing, and controlling functions of management. Learn whes to determine the sensitivity of some of its budoit values to changes in the economy Using the information on the completed budgets, answer the following questions. Consider ca question or tely, asuming that will other data remains the same, including the level of production of each model 1.teamco believes that sales of the Dalwe Abacus model may decrease in 2012. If atacus sales we pero what will be the effect on teamcal Income before income tax for moich Ignore any change in Cost of Goods Sold a. I learnco sells zero Deluxe Abacus units in 2012. It will break even the company will have zero income before income tax). b. Leannco will have a net loss before income tax If it sels zero Deluxe Alcuni 2013 Learco will still have positive Income before Income tax if it falls zero Deluxe Abacus units in 2012. b 2. Learnco's vender for bead packages is expected to double its price per package of beads. If this occurs, what will be the effect on Leamco's income before income tax 2. If the price for bond packages doubles, LearnCo will break even the company will have ero income before income tax) b. Learn Co we have a loss before income tax if the price for bead package doubles Learno will still have positive income before income tax in the price for bedpadrages doubles Check My Work mentMain doinvokerStake AssignmentSessionLocator Binpro... Coco will still have positive income before income tax if it es zur Dehe Abacus units in 2012. 2. Leamco's vendor for bead packages is expected to double its price per package of beads. If this occurs what will be the effect on teamcox income before income tax a. If the price for bead packages doubles. Learnce will break even the the company will have more income before income tax... b.teamco will have a loss before income tax if the price for bead packages doubles c.lamco will still have positive Income before income tax if the price for bead package doubles CM 3. Lwarno ware that its labor prices for the Guing 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 Luarcos income before income tax a Lence will still have positive income before income tax i Gluing labor cost increase to $15.00 per hour. if Gluing tobor costs increase to $15.00 per hoc Wilbreak even the company will have zero income before income tax) Lema wil ve loss before Income taxi Gluin labor costs increases 15.00 per hour 4. Lemos controler believes that the comany can do it welling expenses by 10% and its administrative expenses by 159. How much would income before income tax increase it mes Die cuts are inplemented Round your answer to the nearest dollar F