Question

Deleon 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		403,700		203,300
Unit selling price		$23		$28
Production budget:
Desired ending finished goods units		27,900		19,300
Beginning finished goods units		31,600		12,600
Direct materials budget:
Direct materials per unit (pounds)		2		3
Desired ending direct materials pounds		33,600		16,700
Beginning direct materials pounds		43,200		14,800
Cost per pound		$3		$4
Direct labor budget:
Direct labor time per unit		0.3		0.6
Direct labor rate per hour		$12		$12
Budgeted income statement:
Total unit cost		$14		$22

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 $543,000 for product JB 50 and $342,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

Answer 1

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1. Sales Budget:
	JB 50	JB 60	Total
Estimates Sales Units	403700	203300	607000
Estimated Selling Price	$                            23	$                  28
Estimated Sale	$             9,285,100	$   5,692,400	$             14,977,500
2. Production Budget:
	JB 50	JB 60	Total
Estimated Sale	403700	203300	607000
Add: Ending Inventory	27900	19300	47200
Units Required	431600	222600	654200
Less: Beginning Inventory	-31600	-12600	-44200
Production needed	400000	210000	610000
3. Direct Material Budget:
	JB 50	JB 60	Total
Production Needed	400000	210000	610000
Per unit of FG needed "GUMM"	2	3
Total Raw Material needed	800000	630000	1430000
Add: Ending Inventory	33600	16700	50300
Units Required	833600	646700	1480300
Less: Beginning Inventory	-43200	-14800	-58000
Estimated Purchase of GUMM	790400	631900	1422300
Cost of Purchase per unit	$                          3.0	$                4.0
Total Purchase Cost	$             2,371,200	$   2,527,600	$                4,898,800
4. Direct Labor Budget
	JB 50	JB 60	Total
Production Needed	400000	210000	610000
Per unit of FG needed Hours	0.3	0.6
Total Labor Hours Needed	120000	126000	246000
Labor Rate per Hour	$                            12	$                  12
Total Direct Labor Budget	$             1,440,000	$   1,512,000	$                2,952,000
5. Budgeted Income Statement:
		JB 50	JB 60	Total
Sale		$   9,285,100	$                5,692,400	$            14,977,500
Less: Cost of Goods Sold	403700*14	$   5,651,800
	203300*22		$                4,472,600
Total COGS				$            10,124,400
Gross Margin		$   3,633,300	$                1,219,800	$              4,853,100
Less: Selling Expense		$       662,000	$                   365,000	$              1,027,000
Less: Administration Expenses		$       543,000	$                   342,000	$                  885,000
Net Operating Income		$   2,428,300	$                   512,800	$              2,941,100
Less: Interest Expense				$                  150,000
Income Before tax				$              2,791,100
Less: Tax 30%				$                  837,330
Net Income				$              1,953,770