Question

Problem 22-02A 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 60 403,400 $22 201,800 $27 27,500 32,800 17,200 13,800 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 31,100 42,600 17,800 12,000 0.3 $10 0.6 $10 $13 $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 B 50 and $361,000 for product JB 60, and administrative expenses of $541,000 for product B 50 and $345,000 for product B 60. Interest expense is $150,000 (not allocated to products). Income taxes are expected to be 30%.

Answer 1

Total DELEON INC. Direct Labor Budget For the Year Ending December 31, 2020 JB 50 JB 60 Units to be produced 398,100 205,200 Direct labor time per unit 0.3 0.6 Total Required Direct Labor Hours 119,430 123,120 Direct Labor Cost per Hour 10 $ 10 Total Direct Labor Cost $ 1,194,300 $ 1,231,200 $ 2,425,500 Total $ 14,323,400 9,683,800 4,639,600 DELEON INC. Budgeted Income Statement For the Year Ending December 31, 2020 JB 50 JB 60 Sales $ 8,874,800 $ 5,448,600 Cost of goods sold 5,244,200 4,439,600 Gross Profit 3,630,600 1,009,000 Operating Expenses Selling expenses 662,000 361,000 Administrative expenses 541,000 345,000 Total Operating expenses 1,203,000 706,000 Income from Operations $ 2,427,600 $ 303,000 Interest expense Income before income taxes Income tax expenses Net Income/(Loss) 1,023,000 886,000 1,909,000 2,730,600 150,000 2,580,600 774,180 1,806,420 $

Working Notes: 1) Number of Units to be produced JB 50 Budgeted Sales unit Add: Desired Ending Inventory Less: Beginning inventory Units to be produced JB 60 403,400 27,500 (32,800) 398,100 201,800 17,200 (13,800) 205,200 2) Sales Budgeted Sales unit (a) Selling price per unit (b) Sales revenue (axb) JB 50 403,400 $ 22 $ 8,874,800 JB 60 201,800 $ 27 $ 5,448,600 3) Cost of goods sold Budgeted Sales unit (a) Unit cost (b) Cost of goods sold (a xb) JB 50 JB 60 403,400 201,800 $ 13 $ $ 5,244,200 $ 4,439,600 22 4) Income tax expenses Income before income tax Income tax (2,580,600 ~ 30%) 2,580,600 774,180