Question

Cost of Goods Sold Budget

Play-Disc makes Frisbee-type plastic discs. Each 12-inch diameter plastic disc has the following manufacturing costs:

Direct materials	$1.80
Direct labor	0.45
Variable overhead	0.75
Fixed overhead	1.80
Total unit cost	$4.80

For the coming year, Play-Disc expects to make 300,000 plastic discs, and to sell 281,000 of them. Budgeted beginning inventory in units is 20,000 with unit cost of $4.80. (There are no beginning or ending inventories of work in process.)

Required:

1. Calculate the total budgeted cost of units produced for Play-Disc for the coming year. Show the cost of direct materials, direct labor, and overhead.

Budgeted direct materials	$
Budgeted direct labor
Budgeted overhead
Total budgeted manufacturing cost	$

2. Prepare a cost of goods sold budget for Play-Disc for the year.

Play-Disc
Cost of Goods Sold Budget
For the Year
	$
Total manufacturing cost	$
Cost of goods sold	$

3. What if the beginning inventory of finished goods was $95,400 (for 20,000 units)? How would that affect the cost of goods sold budget? (Assume Play-Disc uses the FIFO method.)
The cost of goods sold would to $.

Answer 1

Req 1.
Total Budgeted cost to make 300000 discs
Budgeted Material cost				540000
Budgeted Labour cost				135000
Budgeted Overheads (2.55*300000)				765000
Budgeted Manufacturing Cost				1440000
Req 2.
Budgeted Cost of goods sold
Beginning Inventory of FG (20000*4.80)				96000
Add: Total Budgeted Manufacturing Cost				1440000
				1536000
Less: Ending Inventory (39000 units @4.80)				187200
Cost of goods sold for 281000 units				1348800
Req 3.
Budgeted Cost of goods sold
Beginning Inventory of FG				95400
Add: Total Budgeted Manufacturing Cost				1440000
				1535400
Less: Ending Inventory (39000 units @4.80)				187200
Cost of goods sold for 281000 units				1348200