The cost of goods sold section of Argo Corporations operating budget for 200B is presented below: Materials
Question:
The cost of goods sold section of Argo Corporation’s operating budget for 200B is presented below:
Materials | ||
Inventory, January 1 (16,000 units) | P 960,000 | |
Purchases | 9,120,000 | |
Available for use | P10,080,000 | |
Inventory, December 31 (18,500 units) | 1,184,000 | 8,896,000 |
Labor | 784,000 | |
Factory overhead: Variable | P2,009,600 | |
Fixed | 1,120,000 | 3,129,600 |
Cost of goods manufactured (140,000 units) | P12,809,600 | |
Add finished goods inventory, January 1 (9,300 units) | 744,000 | |
Cost of goods available for sale | P13,553,600 | |
Less finished goods inventory, December 31 (3,300 units) | 301,600 | |
Budgeted cost of goods sold | P13,255,000 |
The actual results for the first quarter of 200B require the following changes in the budget assumptions:
The budgeted production for the year is expected to increase by 5,000 units. During the first quarter, the company has already produced 25,000 units. The balance of production will be scheduled in equal segments over the last 3 quarters of the budget year.
The expected finished goods inventory on January 1 dropped to only 3,000 units, but its total value will not be revised anymore. The ending inventory value is computed using the average manufacturing cost for the year.
A new Labor Bill passed by Congress is expected to be signed a law by the President. The new law will take effect beginning the last quarter of the budget year, including a provision for an Increase of 8% in wage rates.
The company uses the FIFO method in valuing its materials inventory. During the first quarter, the company purchased 27,500 units of direct materials for P1,760,000. The remaining direct materials requirement will be purchased evenly for the last 9 months of the budget year. Effective July 1, 200B, the beginning of the third quarter, direct materials cost is expected to increase by 5%. The assumptions regarding the quantity of materials inventories at the beginning and end of the year will remain unchanged.
The variable factory overhead of P2,009,600 includes indirect materials and factory supplies amounting to P889,600. It is computed at 10% of the cost of materials used. The balance of the variable factory overhead varies directly with production.
There will be no change in the budgeted fixed factory overhead cost.
Considering the given actual data for the first quarter, as well as the changes in assumptions and estimates in the budgeted data for the year, the company's accountant prepared a revised budgeted cost of goods sold statement. This revised statement should show:
Requirements:
Budgeted Materials Purchases of ?
Budgeted Cost Materials Inventory at December 31, 200B of ?
The Budgeted Direct Labor Cost of ?
The Budgeted Cost of Goods Manufactured of ?
The Budgeted Cost of Goods Sold of ?
Financial and Managerial Accounting Using Excel for Success
ISBN: 978-1111993979
1st edition
Authors: James Reeve, Carl S. Warren, Jonathan Duchac