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Chapter 22: Q25E (page 1234)

Preparing an operating budget—cost of goods sold budget

Refer to the budgets prepared in Exercise E22-24. Determine the cost per kit to manufacture the model airplane kits. Grady projects sales of 100, 150, 100, and 200 kits for the next four quarters. Prepare a cost of goods sold budget for the year. Grady has no kits in beginning inventory. Round amounts to two decimal places.

Short Answer

Expert verified

Answer

The total budgeted cost of goods sold is $3.025

Step by step solution

01

Calculation of cost per unit


Amount ($)

Direct materials cost per kit (4 ounce per kit x $1/Ounce)

$4

Direct labor cost per kit (0.10 hour per kit x $10 per direct labor hour)

$1

Manufacturing overhead cost per kit (0.10 hour per kit x$5/DLHr)

$0.5

Total projected manufacturing cost per kit

$5.5

02

Preparation of cost of goods sold budget


Quarter 1

Quarter 2

Quarter 3

Quarter 4

Projected sales of kits

100

150

100

200

projected manufacturing cost per kit

$5.5

$5.5

$5.5

$5.5

Total budgeted cost of goods sold

$550

$825

$550

$1,100

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Most popular questions from this chapter

Preparing the financial budget—cash budget

Use the original schedule of cash receipts completed in Exercise E22-26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.

Additional information: Marcel’s beginning cash balance is \(5,000, and Marcel desires to maintain a minimum ending cash balance of \)5,000. Marcel borrows cash as needed at the beginning of each month in increments of \(1,000 and repays the amounts borrowed in increments of \)1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.

Preparing an operating budget—sales, production, direct materials, direct labor, overhead, COGS, and S&A expense budgets The Irwin Batting Company manufactures wood baseball bats. Irwin’s two primary products are a youth bat, designed for children and young teens, and an adult bat, designed for high school and college-aged players. Irwin sells the bats to sporting goods stores, and all sales are on account. The youth bat sells for \(35; the adult bat sells for \)50. Irwin’s highest sales volume is in the first three months of the year as retailers prepare for the spring baseball season. Irwin’s balance sheet for December 31, 2018, follows:

Other data for Irwin Batting Company for the first quarter of 2019:

a. Budgeted sales are 1,400 youth bats and 3,300 adult bats.

b. Finished Goods Inventory on December 31, 2018, consists of 700 youth bats at \(15 each and 550 adult bats at \)10 each.

c. Desired ending Finished Goods Inventory is 220 youth bats and 300 adult bats; FIFO inventory costing method is used.

d. Direct materials requirements are 40 ounces of wood for youth bats and 70 ounces of wood for adult bats. The cost of wood is \(0.10 per ounce.

e. Raw Materials Inventory on December 31, 2018, consists of 90,000 ounces of wood at \)0.10 per ounce.

f. Desired ending Raw Materials Inventory is 90,000 ounces (indirect materials are insignificant and not considered for budgeting purposes).

g. Each bat requires 0.4 hours of direct labor; direct labor costs average \(26 per hour.

h. Variable manufacturing overhead is \)0.30 per bat.

i. Fixed manufacturing overhead includes \(1,300 per quarter in depreciation and \)14,977 per quarter for other costs, such as insurance and property taxes.

j. Fixed selling and administrative expenses include \(13,000 per quarter for salaries; \)3,500 per quarter for rent; \(1,400 per quarter for insurance; and \)450 per quarter for depreciation. k. Variable selling and administrative expenses include supplies at 1% of sales.

Requirements

1. Prepare Irwin’s sales budget for the first quarter of 2019.

2. Prepare Irwin’s production budget for the first quarter of 2019.

3. Prepare Irwin’s direct materials, direct labor budget, and manufacturing overhead budget for the first quarter of 2019. Round the predetermined overhead allocation rate to two decimal places. The overhead allocation base is direct labor hours.

4. Prepare Irwin’s cost of goods sold budget for the first quarter of 2019.

5. Prepare Irwin’s selling and administrative expense budget for the first quarter of 2019.

Preparing a financial budget—schedule of cash payments

Jefferson Company has budgeted purchases of merchandise inventory of \(457,500 in January and \)533,250 in February. Assume Jefferson pays for inventory purchases 70% in the month of purchase and 30% in the month after purchase. The Accounts Payable balance on December 31 is $98,275. Prepare a schedule of cash payments for purchases for January and February.

What are the three sections of the cash budget?

Preparing a financial budget—schedule of cash receipts

Berry expects total sales of \(359,000 in January and \)405,000 in February. Assume that Berry’s sales are collected as follows:

80% in the month of the sale

10% in the month after the sale

6% two months after the sales

4% never collected

November sales totaled \(350,000, and December sales were \)325,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.
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