Question

Orange Inc. is preparing its annual budgets for the year ending December 31, 2020. Accounting assistants furnish the data shown below.

		Product JB 50		Product JB 60
Sales budget:
Anticipated volume in units		401,600		203,100
Unit selling price		$21		$27
Production budget:
Desired ending finished goods units		27,100		17,000
Beginning finished goods units		31,100		13,300
Direct materials budget:
Direct materials per unit (pounds)		2		3
Desired ending direct materials pounds		33,300		17,600
Beginning direct materials pounds		41,800		12,000
Cost per pound		$3		$3
Direct labor budget:
Direct labor time per unit		0.4		0.6
Direct labor rate per hour		$11		$11
Budgeted income statement:
Total unit cost		$13		$21

An accounting assistant has prepared the detailed manufacturing overhead budget and the selling and administrative expense budget. The latter shows selling expenses of $662,000 for product JB 50 and $365,000 for product JB 60, and administrative expenses of $544,000 for product JB 50 and $345,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

1) Prepare the budgeted multiple-step income statement for the year. (Note: income taxes are not allocated to the products).

                                      Orange Inc.

                   For the Year Ending December 31,2020

                                   JB 50          JB 60 Total

a)Sales	$8,43360	$5,483,700	$13,917,300
b)Cost of Goods Sold
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)

Thank You

Answer 1

WORKING NOTES :

	SALES BUDGET
PARTICULARS	JB 50	JB 60	TOTAL
sales unit	401600	203100
Selling price per unit	$21.00	$27.00
Sales Revenue	$84,33,600	$54,83,700	$1,39,17,300

PRODUCTION BUDGET
PARTICULARS	JB 50	JB 60
sales unit	401600	203100
Add: ending inventory	27100	17000
Total units	428700	220100
Less: Beginning Inventory	31100	13300
units produced	397600	206800

MATERIAL PURCHASE BUDGET
PARTICULARS	JB 50	JB 60	TOTAL
Units produced	397600	206800
Material required per unit (In pound)	2	3
Total material required	795200	620400
Add: ending inventory of material	33300	17600
Total material required	828500	638000
Less: beginning inventory of material	41800	12000
purchase of raw material (In pound)	786700	626000
Cost per pound	$3	$3
Budgeted purchase of raw material	$23,60,100	$18,78,000	$42,38,100

DIRECT LABOUR BUDGET
PARTICULARS	JB 50	JB 60	TOTAL
Budgeted production units	397600	206800
Direct labor hour per unit	0.4	0.6
Total direct labor hours	159040	124080
Direct labor rate per hour	$11	$11
Budgeted Direct labor cost	$17,49,440	$13,64,880	$31,14,320

SOLUTION

BUDGETED INCOME STATEMENT           FOR THE YEAR ENDED 31st DECEMBER 2020
PARTICULARS	JB 50	JB 60	TOTAL
Sales Revenue	$84,33,600	$54,83,700	$1,39,17,300
Cost of goods sold JB 50 - 401600 * $13 JB 60 - 203100 * $21	$52,20,800	$42,65,100	$94,85,900
Gross Profit	$32,12,800	$12,18,600	$44,31,400
Operating Expenses:
Selling Expenses	$6,62,000	$3,65,000	$10,27,000
Administrative expenses	$5,44,000	$3,45,000	$8,89,000
Total Operating expenses	$12,06,000	$7,10,000	$19,16,000
Operating Income	$20,06,800	$5,08,600	$25,15,400
Interest expense			$1,50,000
Income before taxes			$23,65,400
Income tax expense (30%)			$7,09,620
Net Income			$16,55,780