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.

Short answer

Answer

The total budgeted cost of goods sold is $3.025

Step-by-step solution

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

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