Mastery Problem: Budgeting 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.

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 Learn Co 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, 20Y2 Units Basic Units Deluxe Expected units to be sold (from Sales Budget) 36,000 36,000 Desired ending inventory, December 31, 20Y2 1,000 3,000 Total units available 37,000 39,000 Estimated beginning inventory, January 1, 20Y2 (1,050) (2.100) Total units to be produced 35,950 36,900 v Direct Materials Purchases Budget Shaded cells have feedback 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 Pieces Beads Packages required per unit: Basic abacus Deluxe abacus Cost per package: Wood pieces $0.20 Beads $0.20 Units to be produced (from Production Budget): Basic abacus Deluxe abacus 35,950 36,900 V Points: 212 LearnCo Direct Materials Purchases Budget For the Year Ending December 31, 20Y2 Direct Materials Wood Pieces Beads Total Packages required for production: Basic abacus 71,900 35,950 73,800 Deluxe abacus 110,700 Desired inventory, December 31, 20Y2 2,200 5,000 Total packages available 111,950 187,600 Estimated inventory, January 1, 20Y2 (3,500) (4.500) Total packages to be purchased 183,100 V 108,450 $0.20 Unit price (per package) x $0.20 V Total direct materials to be purchased $21,690 V $36.620 558,310 Direct Labor Cost Budget Shaded cells have feedback. 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 Gluing Assembly Hours required per unit: Basic abacus 0.10 0.10 0.20 Deluxe abacus 0.10 Labor hourly rate: Gluing $13.00 Assembly $19.00 Units to be produced (from Production Budget): Basic abacus 35,950 36.900 Deluxe abacus Points: 2/2 LearnCo Direct Labor Cost Budget For the Year Ending December 31, 20Y2 Gluing Assembly Total Hours required for production: Basic abacus Deluxe abacus Total 3,595 V 3,690 V 7,285 $13.00 $94,705 3,595 7,380 V 10,975 V $19.00 $208,525 Hourly rate x Total direct labor cost $303,230 Factory Overhead Cost Budget Shaded cells have feedback. 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. LearnCo Factory Overhead Cost Budget For the Year Ending December 31, 20Y2 Indirect factory wages $5,400 Power and light 11,250 Depreciation of plant and equipment 1,450 Total factory overhead cost $18,100 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 Learn Co, using information that follows provided by the controller, and using the previous budgets you have prepared. 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 $ 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 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 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 $2,000 Interest expense for the year $1,500 LearnCo's income tax rate 40% Learn Co Score: 31/52 Budgeted Income Statement For the Year Ending December 31, 20Y2 1 Revenue from sales $720,000.00 374,313.00 Cost of goods sold Gross profit $345,688.00 Selling and administrative expenses: Selling expenses $65,400.00 Administrative expenses 154.000.00 Total selling and administrative expenses 219.400.00 Income from operations $126,288.00 Other revenue and expense: 10 Interest revenue $2,000.00 1,500.00 Interest expense 12 Income before income tax 500.00 $125,788.00 50,315.00 Income tax 14 Net income $75,472.50 4. Learn Co's 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. $29,641 Points: 0/1 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 Learn Co 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, 20Y2 Units Basic Units Deluxe Expected units to be sold (from Sales Budget) 36,000 36,000 Desired ending inventory, December 31, 20Y2 1,000 3,000 Total units available 37,000 39,000 Estimated beginning inventory, January 1, 20Y2 (1,050) (2.100) Total units to be produced 35,950 36,900 v Direct Materials Purchases Budget Shaded cells have feedback 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 Pieces Beads Packages required per unit: Basic abacus Deluxe abacus Cost per package: Wood pieces $0.20 Beads $0.20 Units to be produced (from Production Budget): Basic abacus Deluxe abacus 35,950 36,900 V Points: 212 LearnCo Direct Materials Purchases Budget For the Year Ending December 31, 20Y2 Direct Materials Wood Pieces Beads Total Packages required for production: Basic abacus 71,900 35,950 73,800 Deluxe abacus 110,700 Desired inventory, December 31, 20Y2 2,200 5,000 Total packages available 111,950 187,600 Estimated inventory, January 1, 20Y2 (3,500) (4.500) Total packages to be purchased 183,100 V 108,450 $0.20 Unit price (per package) x $0.20 V Total direct materials to be purchased $21,690 V $36.620 558,310 Direct Labor Cost Budget Shaded cells have feedback. 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 Gluing Assembly Hours required per unit: Basic abacus 0.10 0.10 0.20 Deluxe abacus 0.10 Labor hourly rate: Gluing $13.00 Assembly $19.00 Units to be produced (from Production Budget): Basic abacus 35,950 36.900 Deluxe abacus Points: 2/2 LearnCo Direct Labor Cost Budget For the Year Ending December 31, 20Y2 Gluing Assembly Total Hours required for production: Basic abacus Deluxe abacus Total 3,595 V 3,690 V 7,285 $13.00 $94,705 3,595 7,380 V 10,975 V $19.00 $208,525 Hourly rate x Total direct labor cost $303,230 Factory Overhead Cost Budget Shaded cells have feedback. 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. LearnCo Factory Overhead Cost Budget For the Year Ending December 31, 20Y2 Indirect factory wages $5,400 Power and light 11,250 Depreciation of plant and equipment 1,450 Total factory overhead cost $18,100 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 Learn Co, using information that follows provided by the controller, and using the previous budgets you have prepared. 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 $ 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 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 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 $2,000 Interest expense for the year $1,500 LearnCo's income tax rate 40% Learn Co Score: 31/52 Budgeted Income Statement For the Year Ending December 31, 20Y2 1 Revenue from sales $720,000.00 374,313.00 Cost of goods sold Gross profit $345,688.00 Selling and administrative expenses: Selling expenses $65,400.00 Administrative expenses 154.000.00 Total selling and administrative expenses 219.400.00 Income from operations $126,288.00 Other revenue and expense: 10 Interest revenue $2,000.00 1,500.00 Interest expense 12 Income before income tax 500.00 $125,788.00 50,315.00 Income tax 14 Net income $75,472.50 4. Learn Co's 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. $29,641 Points: 0/1