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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Cost of goods sold budget

Wilmington Chemical Company uses oil (o produce two types of plastic products, P1 and P2. Wilmington budgeted 50,000 barrels of oil for purchase in June for $50 per barrel. Direct labor budgeted in the chemical process was $300,000 for June. Factory overhead was budgeted 5500,000 during June. The inventories on June 1 were estimated to be:

Oil $15,500
P1 25,400
P2 22,900
Work in process 3.400

The desired inventories on June 30 were:

Oil $16,100
P1 28,500
P2 25,000
Work in process 4,000

Use the preceding information to prepare a cost of goods sold budget for June.

To determine

Budgeting is a process to prepare the financial statement by the manager to estimate the organization’s future actions. It is also helpful to satisfy the everyday activities.

To Prepare: The cost of goods sold budget of Company W.

Explanation

The following table shows the cost of goods sold budget.

W Company
Cost of Goods Sold Budget
For the month ending June 30
Particulars Amount ($) Amount ($) Amount ($)
Finished goods inventory, June 1     48,300 (1)
Work-in-process inventory, June 1   3,400  
Direct material:      
  Direct materials inventory, June 1 15,000    
  Direct materials purchases 2,500,000(2)    
Cost of direct materials available for use 2,515,500    
Less: Direct materials inventory, June 30 (16,100)    
Cost of direct materials placed in production 2,499,400    
Direct labor 300,000    
Factory overhead 500,000    
Total manufacturing cost 3,299,400  
Total work-in-process during the period 3,302,800  
Less: Work-in-process inventory, June 30   (4,000)  
Cost o...

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