Q25E - Horngren'S Financial And Managerial Accounting

Question

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.

Step-by-Step Solution

Answer

Answer

The total budgeted cost of goods sold is $3.025

Step 1: 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

Step 2: 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