8SE - Horngren'S Financial And Managerial Accounting

Question

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.

 

Step-by-Step Solution

Answer

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

Step 1: 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.

Step 2: 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