Question

Problem 21-2A (Part Level Submission)

Deleon Inc. is preparing its annual budgets for the year ending December 31, 2017. Accounting assistants furnish the data shown below.

		Product JB 50		Product JB 60
Sales budget:
Anticipated volume in units		402,300		203,700
Unit selling price		$23		$27
Production budget:
Desired ending finished goods units		28,100		18,100
Beginning finished goods units		34,100		12,500
Direct materials budget:
Direct materials per unit (pounds)		1		3
Desired ending direct materials pounds		34,000		18,500
Beginning direct materials pounds		44,600		13,400
Cost per pound		$3		$3
Direct labor budget:
Direct labor time per unit		0.4		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 $661,000 for product JB 50 and $361,000 for product JB 60, and administrative expenses of $545,000 for product JB 50 and $344,000 for product JB 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

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

Answer 1

Budgeted income statement for the year
	Amount
Sales Revenue		$14,752,800
Less: Cost of goods sold		$10,113,600
Gross Profit		$4,639,200
Operating Expenses
Selling expenses	$1,022,000
Administrative expenses	$889,000
Total operating expenses		$1,911,000
Operating Profit		$2,728,200
Non-operating expenses
Interest expense		$150,000
Income before taxes		$2,578,200
Tax @30%		$773,460
Net Income		$1,804,740

Working note:
Sales revenue
	Product JB 50	Product JB 60	Total
Units of sales	402300	203700
Unit selling price	$23	$27
Sales revenue	$9,252,900	$5,499,900	$14,752,800
Cos of goods sold
	Product JB 50	Product JB 60	Total
Units of sales	402300	203700
Total unit cost	$14	$22
Sales revenue	$5,632,200	$4,481,400	$10,113,600
	Product JB 50	Product JB 60	Total
Selling expenses	$661,000	$361,000	$1,022,000
Adminitrative expenses	$545,000	$344,000	$889,000