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Pronghorn Inc
Pronghorn 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 units403,300202,500 Unit selling price$21$28Production budget: Desired ending finished goods units26,80016,700 Beginning finished goods units33,80012,900Direct materials budget: Direct materials per unit (pounds)12 Desired ending direct materials pounds33,30018,800 Beginning direct materials pounds44,80013,300 Cost per pound$3$3Direct labor budget: Direct labor time per unit0.40.6 Direct labor rate per hour$12$12Budgeted income statement: Total unit cost$14$21
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 $364,000 for product JB 60, and administrative expenses of $541,000 for product JB 50 and $341,000 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).
Expert Solution
| Sales Budget | |||
| JB 50 | JB 60 | Total | |
| Expected Sales units | 403,300 | 202,500 | |
| Unit Selling Price | $21 | $28 | |
| Expected Sales Revenue | $8,469,300 | $5,670,000 | $14,139,300 |
| Production Budget | ||
| JB 50 | JB 60 | |
| Sales units | 403,300 | 202,500 |
| Add : Desired Ending Inventory | 26,800 | 16,700 |
| Total Goods Required | 430,100 | 219,200 |
| Less : Beginning Inventory | 33,800 | 12,900 |
| Production Required | 396,300 | 206,300 |
| Direct Material Budget | |||
| JB 50 | JB 60 | Total | |
| Units to be produced | 396,300 | 206,300 | |
| Raw Material Per unit | 1 | 2 | |
| Raw Material for Production | 396300 | 412600 | |
| Add : Desired Ending Inventory | 33,300 | 18,800 | |
| Total Material Required | 429,600 | 431,400 | |
| Less : Beginning Inventory | 44,800 | 13,300 | |
| Material to be purchased | 384,800 | 418,100 | |
| Cost per pound | $3 | $3 | |
| Budgeted Cost of purchases | $1,154,400 | $1,254,300 | $2,408,700 |
| Direct Labor Budget | |||
| JB 50 | JB 60 | Total | |
| Units to be produced | 396,300 | 206,300 | |
| Direct Labor hours per unit | 0.4 | 0.6 | |
| Total Variable manufacturing overhead | 158520 | 123780 | |
| Direct Labor rate per hour | $12 | $12 | |
| Budgeted Direct Labor Cost | $1,902,240 | $1,485,360 | $3,387,600 |
| Income Statement | |||
| JB 50 | JB 60 | Total | |
| Sales Revenue | $8,469,300 | $5,670,000 | $14,139,300 |
| Cost of Goods Sold (403,300*$14; 202,500*$21) | 5646200 | 4252500 | 9898700 |
| Gross Profit | $2,823,100 | $1,417,500 | $4,240,600 |
| Operating Expenses | |||
| Selling Expenses | 661000 | 364000 | 1025000 |
| Administrative Expenses | $541,000 | $341,000 | $882,000 |
| Total Operating Expenses | $1,202,000 | $705,000 | $1,907,000 |
| Net Operating Income | $1,621,100 | $712,500 | $2,333,600 |
| Interest Expense | 150000 | ||
| Income before income taxes | $2,183,600 | ||
| Income tax expense @30% | $655,080 | ||
| Net Income | $1,528,520 |
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