Cornerstone Exercise 8.7

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 $1.85
Direct labor 0.50
Variable overhead 0.75
Fixed overhead 1.80
Total unit cost $4.90

For the coming year, Play-Disc expects to make 400,000 plastic discs, and to sell 389,000 of them. Budgeted beginning inventory in units is 19,000 with unit cost of $4.90. (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.

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

3. What if the beginning inventory of finished goods was $92,200 (for 19,000 units)? How would that affect the cost of goods sold budget? (Assume Play-Disc uses the FIFO method.)

The cost of goods sold would - Select your answer -increase decrease Correct 1 of Item 3 to $