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Chapter 22: 8SE (page 1229)

Preparing an operating budget—cost of goods sold budget Butler Company expects to sell 1,650 units in January and 1,550 units in February. The company expects to incur the following product costs:

Direct materials cost per unit \( 85

Direct labor cost per unit 60

Manufacturing overhead cost per unit 55

The beginning balance in Finished Goods Inventory is 250 units at \)200 each for a total of $50,000. Butler uses FIFO inventory costing method. Prepare the cost of goods sold budget for Butler for January and February.

Short Answer

Expert verified

The budgeted cost of goods sold is $380,000 and $310,000 for January and February respectively.

Step by step solution

01

Meaning of cost of goods sold budget

A budget that estimates the cost of goods sold of projected sales is known as the cost of goods sold budget.

02

Preparation of cost of goods sold budget for January and February

Particulars

January

February

Beginning inventory, 200 units

$50,000

Tablets produced and sold in 2021 @ $200 each (1,650 and 1,550 units is January and February)

$330,000

$310,000

Total Budgeted Cost of Goods Sold

$380,000

$310,000

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Most popular questions from this chapter

Question: Preparing an operating budget—sales budget; inventory, purchases and COGS budget; and S&A expense budget Burton Office Supply’s March 31, 2018, balance sheet follows:

The budget committee of Burton Office Supply has assembled the following data: a. Sales in April are expected to be \(200,000. Burton forecasts that monthly sales will increase 2% over April sales in May. June’s sales will increase by 4% over April sales. July sales will increase 20% over April sales. b. Burton maintains inventory of \)15,000 plus 25% of the cost of goods sold budgeted for the following month. Cost of goods sold equal 50% of sales revenue. c. Monthly salaries amount to \(7,000. Sales commissions equal 5% of sales for that month. d. Other monthly expenses are as follows: • Rent: \)2,000 • Depreciation: \(200 • Insurance: \)100 • Income tax: $2,200

Requirements

1. Prepare Burton’s sales budget for April and May 2018. Round all calculations to the nearest dollar.

2. Prepare Burton’s inventory, purchases, and cost of goods sold budget for April and May.

3. Prepare Burton’s selling and administrative expense budget for April and May.

What is a master budget?

Camp Company is a sporting goods store. The company sells a tent that sleeps six people. The store expects to sell 250 tents in 2018 and 280 tents in 2019. At the beginning of 2018, Camp Company has 25 tents in Merchandise Inventory and desires to have 5% of the next year’s sales available at the end of the year. How many tents will Camp Company need to purchase in 2018?

Preparing a financial budget—budgeted income statement and balance sheet

Buncomb Companyhas the following post-closing trial balance on December 31, 2018:

The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales,all on account $ 121,700 Budgeted purchases of merchandise inventory,

all on account 61,200 Budgeted cost of goods sold 60,850 Budgeted selling and administrative expenses: Commissions expense 6,085 Salaries expense 3,000 Rent expense 4,100 Depreciation expense 900 Insurance expense 300 Budgeted cash receipts from customers 126,450 Budgeted cash payments for merchandise inventory 67,925 Budgeted cash payments for salaries and commissions 14,836 Budgeted income tax expense 4,700 Additional information:

Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

Requirements

  1. Prepare a budgeted income statement for the quarter ended March 31, 2019.
  2. 2. Prepare a budgeted balance sheet as of March 31, 2019.

What is the formula used to determine the amount of merchandise inventory to be purchased?
See all solutions

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