Question

Problem 21-2A 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 60 204,600 404,400 $21 $27 27,900 34,100 16,900 13,400 2 Sales budget: Anticipated volume in units Unit selling price Production budget: Desired ending finished goods units Beginning finished goods units Direct materials budget: Direct materials per unit (pounds) Desired ending direct materials pounds Beginning direct materials pounds Cost per pound Direct labor budget: Direct labor time per unit Direct labor rate per hour Budgeted income statement: Total unit cost 32,900 43,900 - $2 18,100 11,100 $4 0.3 0.6 $11 $11 $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 $664,000 for product JB 50 and $364,000 for product JB 60, and administrative expenses of $542,000 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%.

Answer 1

Sales Budget for the Year:

DELEON INC. Sales Budget For the Year Ending December 31, 2017
	JB 50	JB 60	Total
Expected Unit Sales	404,400	204,600
Unit Selling Price	$21	$27
Total Sales	$8,492,400	$5,524,200	$14,016,600

Production Budget for the Year:

DELEON INC. Production Budget For the Year Ending December 31, 2017
	JB 50	JB 60
Expected Unit Sales	404,400	204,600
Add: Desired Ending Finished Goods Units	27,900	16,900
Total Required Units	432,300	221,500
Less: Beginning Finished Goods Units	(34,100)	(13,400)
Required Production Units	398,200	208,100

Direct Materials Budget for the Year:

DELEON INC. Direct Materials Budget For the Year Ending December 31, 2017
	JB 50	JB 50	Total
Units to be Produced	398,200	208,100
Direct Materials Per Unit	1	2
Total Pounds Needed for Production	398,200	416,200
Add: Desired Ending Direct Materials	32,900	18,100
Total Materials Required	431,100	434,300
Less: Beginning Direct Materials	(43,900)	(11,100)
Direct Materials Purchases	387,200	423,200
Cost Per Pound	$2	$4
Total Cost of Direct Materials Purchases	$774,400	$1,692,800	$2,467,200

Direct Labor Budget for the Year:

DELEON INC. Direct Labor Budget For the Year Ending December 31, 2017
	JB 50	JB 60	Total
Units to be produced	398,200	208,100
Direct labor time (hours) per unit	0.3	0.6
Total required direct labor hours	119,460	124,860
Direct labor cost per hour	$11	$11
Total direct labor cost	$1,314,060	$1,373,460	$2,687,520

Budgeted Multiple Step Income Statement for the Year:

DELEON INC. Budgeted Income Statement For the Year Ending December 31, 2017
	JB 50	JB 60	Total
Sales	$8,492,400	$5,524,200	$14,016,600
Cost of Goods Sold	$5,257,200	$4,296,600	$9,553,800
Gross Profit	$3,235,200	$1,227,600	$4,462,800
Operating Expenses:
Selling Expenses	$664,000	$364,000	$1,028,000
Administrative Expenses	$542,000	$344,000	$886,000
Total Operating Expenses	$1,206,000	$705,000	$1,914,000
Income Before Income Taxes	$ 2,029,200	$519,600	$2,548,800
Income Tax Expense (30%)	$608,760	$155,880	$764,640
Net Income	$1,420,440	$363,720	$1,784,160