Question

The following annual budget data relates to Navient Inc. for the year ending December 31, 2018.

	Item APP	Item ZAP
Sales budget:
Anticipated volume in units	400,000	250,000
Unit selling price	$23.00	$29.00
Production budget:
Desired ending finished goods units	27,000	20,000
Beginning finished goods units	34,000	11,000
Direct materials budget:
Direct materials per unit (pounds)	3	4
Desired ending direct materials pounds	35,000	16,000
Beginning direct materials pounds	43,000	12,000
Cost per pound	$4.00	$5.00
Direct labor budget:
Direct labor time per unit	0.4	0.6
Direct labor rate per hour	$14.00	$14.00
Budgeted income statement:
Total unit cost	$14.00	$22.00

A detailed selling and administrative expense budget shows selling expenses of $660,000 for product APP and $360,000 for product ZAP, and administrative expenses of $545,000 for product APP and $344,000 for product ZAP. Income taxes are expected to be 25%.

Instructions

Prepare the following budgets for the year. Show data for each product. .

(a) Sales

(b) Production

(c) Direct materials

(d) Direct labor

(e) Income statement (Note: Income taxes are not allocated to the products.)

Answer 1

Answer 1

NAVIENT INC. Sales budget For the year ending December 31, 2018
	Item APP	Item ZAP
Sales units	400000	250000
Price per unit	23	29
Total sales	9200000 units	7250000 units

Answer 2

NAVIENT INC. Production budget For the year ending December 31, 2018
	Item APP	Item ZAP
Budgeted sales units	400000	250000
Add: ending finish unit	27000	20000
	427000	270000
Less: beginning finish units	34000	11000
Planned Production in Units	393000 units	259000 units

Answer 3

NAVIENT INC. Direct material budget For the year ending December 31, 2018
	Item APP	Item ZAP
Budgeted Production in Units	400000	250000
DM Required per Unit	3	4
DM Required of Production	1200000	1000000
Add: Budgeted Ending DM	35000	16000
	1235000	1016000
Less: Beginning Direct Material	43000	12000
Budgeted DM Purchases	1192000	1004000
Cost per Pound	4	5
Budgeted DM Purchases in	$ 4768000	$ 5020000

Answer 4

NAVIENT INC. Direct labor For the year ending December 31, 2018
	Item APP	Item ZAP
Planned Production in Units	393000	259000
Direct Labor Hours per Unit	0.4	0.6
Budgeted Direct Labor Hours	157200	155400
Cost per Direct Labor Hour	14	14
Budgeted Direct Labor Cost	$ 2200800	$ 2175600

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