The sales budget often uses the prior years sales as a starting point, and then sales quantities
Question:
The sales budget often uses the prior year’s sales as a starting point, and then sales quantities are revised for various factors such as planned advertising and promotion, projected pricing changes, and expected industry and general economic conditions. LearnCo has completed reviewing its prior year’s sales and has prepared the following sales budget.
After reviewing LearnCo’s sales budget, you note that three numbers have been omitted. The company’s controller has told you that the units sold for the Basic and Deluxe models are expected to be the same. Fill in the missing amounts.
| LearnCo | |||
| Sales Budget | |||
| For the Year Ending December 31, 20Y2 | |||
| Product | Unit Sales Volume | Unit Selling Price | Total Sales |
| Basic Abacus | | $7.00 | $252,000 |
| Deluxe Abacus | | | 468,000 |
| Totals | 72,000 | | $720,000 |
Production Budget
The production budget should be integrated with the sales budget to ensure that production and sales are kept in balance during the year. The production budget estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels.
You note that LearnCo has omitted six numbers from the following production budget and fill in the missing amounts. You may need to use numbers from the sales budget you prepared.
| LearnCo | ||
| Production Budget | ||
| For the Year Ending December 31, 20Y2 | ||
| | Units Basic | Units Deluxe |
| Expected units to be sold (from Sales Budget) | | |
| Desired ending inventory, December 31, 20Y2 | 1,000 | 3,000 |
| Total units available | | |
| Estimated beginning inventory, January 1, 20Y2 | (1,050) | (2,100) |
| Total units to be produced | | |
Direct Materials Purchases Budget
The direct materials purchases budget should be integrated with the production budget to ensure that production is not interrupted during the year. This budget estimates the quantities of direct materials to be purchased to support budgeted production, along with desired inventory levels of direct materials.
Before you make any changes to the budget, you review the information in the following Direct Materials Data Table and enter the units to be produced from the Production Budget panel. After scanning the direct materials purchases budget (which follows the Direct Materials Data Table), you observe that LearnCo has omitted quite a few numbers from the budget. Fill in the missing amounts. You may need to use numbers from the Direct Materials Data Table, or from the sales budget and production budget you prepared. When required, round your answers to the nearest dollar.
| Direct Materials Data Table | | | ||
| | Wood Pieces | Beads | ||
| Packages required per unit: | | | ||
| Basic abacus | 1 | 2 | ||
| Deluxe abacus | 2 | 3 | ||
| Cost per package: | | | ||
| Wood pieces | $0.25 | | ||
| Beads | $0.25 | | ||
| Units to be produced (from Production Budget): | | | ||
| Basic abacus | | | ||
| Deluxe abacus | | | ||
| LearnCo | ||||
| Direct Materials Purchases Budget | ||||
| For the Year Ending December 31, 20Y2 | ||||
| | Direct Materials | | ||
| | Wood Pieces | Beads | Total | |
| Packages required for production: | | | | |
| Basic abacus | | | | |
| Deluxe abacus | | | | |
| Desired inventory, December 31, 20Y2 | 2,200 | 5,000 | | |
| Total packages available | | | | |
| Estimated inventory, January 1, 20Y2 | (3,500) | (4,500) | | |
| Total packages to be purchased | | | | |
| Unit price (per package) | x | x | | |
| Total direct materials to be purchased | | | $72,888 | |
| | | | | |
Direct Labor Cost Budget
Direct labor needs from the direct labor cost budget should be coordinated between the production and personnel departments so that there will be enough labor available for production.
Before you make any changes to the budget, you review the information in the following Direct Labor Data Table and enter the units to be produced from the Production Budget panel. After scanning the Direct Labor Cost Budget (which follows the Direct Labor Data Table), you observe that LearnCo has omitted quite a few numbers from the budget. Fill in the missing amounts. You may need to use numbers from the Direct Labor Data Table, or from the sales budget, production budget, and direct materials purchases budget you prepared. When required, round your answers to the nearest dollar.
| Direct Labor Data Table | | | |
| | Gluing | Assembly | |
| Hours required per unit: | | | |
| Basic abacus | 0.10 | 0.10 | |
| Deluxe abacus | 0.10 | 0.20 | |
| Labor hourly rate: | | | |
| Gluing | $12.00 | | |
| Assembly | $17.00 | | |
| Units to be produced (from Production Budget): | | | |
| Basic abacus | | | |
| Deluxe abacus | | | |
| LearnCo | |||
| Direct Labor Cost Budget | |||
| For the Year Ending December 31, 20Y2 | |||
| | Gluing | Assembly | Total |
| Hours required for production: | | | |
| Basic abacus | | | |
| Deluxe abacus | | | |
| Total | | | |
| Hourly rate | x | x | |
| Total direct labor cost | | | $273,995 |
Factory Overhead Cost Budget
The factory overhead cost budget should be integrated with the production budget to ensure that production is not interrupted during the year. This budget may be supported by departmental schedules, which normally separate factory overhead costs into fixed and variable costs so that department managers may monitor and evaluate costs during the year. For simplicity, LearnCo has not separated costs in this manner.
After reviewing the following factory overhead cost budget, you note that LearnCo has completed the budget with the exception of one amount. Fill in the missing amount.
| LearnCo | |
| Factory Overhead Cost Budget | |
| For the Year Ending December 31, 20Y2 | |
| Indirect factory wages | $5,400 |
| Power and light | |
| Depreciation of plant and equipment | 1,450 |
| Total factory overhead cost | $18,100 |
Cost of Goods Sold Budget
The cost of goods sold budget integrates the direct materials purchases budget, direct labor cost budget, and factory overhead cost budget. Estimated and desired inventories for direct materials, work in process, and finished goods must also be integrated into the cost of goods sold budget.
Complete the preparation of the cost of goods sold budget for LearnCo, using information that follows provided by the controller, and using the previous budgets you have prepared.
| LearnCo | |||
| Cost of Goods Sold Budget | |||
| For the Year Ending December 31, 20Y2 | |||
| Finished goods inventory, January 1, 20Y2 | | | $9,870 |
| Work in process inventory, January 1, 20Y2 | | $2,010 | |
| Direct materials: | | | |
| Direct materials inventory, January 1, 20Y2 | $2,000 | | |
| Direct materials purchases | | | |
| Cost of direct materials available for use | $ | | |
| Direct materials inventory, December 31, 20Y2 | (1,800) | | |
| Cost of direct materials placed in production | $ | | |
| Direct labor | | | |
| Factory overhead | | | |
| Total manufacturing costs | | | |
| Total work in process during period | | $ | |
| Work in process inventory, December 31, 20Y2 | | (1,250) | |
| Cost of goods manufactured | | | |
| Cost of finished goods available for sale | | | $ |
| Finished goods inventory, December 31, 20Y2 | | | (1,500) |
| Cost of goods sold | | | $ |
Selling/Admin Expenses Budget
The sales budget is often used as the starting point for the selling and administrative expenses budget. For example, a budgeted increase in sales may require more advertising expenses. LearnCo has prepared its selling and administrative expenses budget as follows. This budget is merely reviewed by you for use in the budgeted income statement.
| LearnCo | ||
| Selling and Administrative Expenses Budget | ||
| For the Year Ending December 31, 20Y2 | ||
| Selling expenses: | | |
| Sales salaries expense | $45,000 | |
| Advertising expense | 15,000 | |
| Travel expense | 5,400 | |
| Total selling expenses |
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