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. .

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

Answer 1

Budgeted Income Statement
	APP	ZAP	Total
Sales	9200000	7250000	16450000
Cost of Goods sold	5600000	3500000	9100000
Gross Proft	3600000	3750000	7350000
Operating expenses			0
Selling expenses	660000	360000	1020000
Administrative expenses	545000	344000	889000
Total operating expenses	1205000	704000	1909000
Income before income taxes	2395000	3046000	5441000
Income tax expense(25%)			1360250
Net income			40,80,750.00

workings

Budgeted Income Statement
	APP	ZAP	Total
Sales	=400000*23	=250000*29	=+B4+C4
Cost of Goods sold	=14*400000	=14*250000	=+B5+C5
Gross Proft	=+B4-B5	=+C4-C5	=+B6+C6
Operating expenses			=+B7+C7
Selling expenses	660000	360000	=+B8+C8
Administrative expenses	545000	344000	=+B9+C9
Total operating expenses	=+B8+B9	=+C8+C9	=+B10+C10
Income before income taxes	=+B6-B10	=+C6-C10	=+C11+B11
Income tax expense(25%)			=+D11*0.25
Net income			=+D11-D12