Percy's Pickled Snacks produces several types of pickled vegetables.The company budgets for each quarter in the last month of the previous quarter.In early March, Percy is preparing the budget for pickled beets.Budgeted sales are 12,000 jars for April, 16,000 jars for May, and 19,000 jars for June.Each jar requires 1.2 pounds of beets.The pickling process takes 60 minutes for 20 jars.Because pressurized cooking is used, the processing is monitored by an employee at all times.Each jar of pickled beets sells for $15.00.Percy requires ending Finished Goods inventory equal to 25% of the following month's sales.Other information is as follows: What is Percy's cost of goods sold budget for April?
A)$150,150
B)$138,600
C)$120,900
D)$111,600

Question

Percy's Pickled Snacks produces several types of pickled vegetables.The company budgets for each quarter in the last month of the previous quarter.In early March, Percy is preparing the budget for pickled beets.Budgeted sales are 12,000 jars for April, 16,000 jars for May, and 19,000 jars for June.Each jar requires 1.2 pounds of beets.The pickling process takes 60 minutes for 20 jars.Because pressurized cooking is used, the processing is monitored by an employee at all times.Each jar of pickled beets sells for $15.00.Percy requires ending Finished Goods inventory equal to 25% of the following month's sales.Other information is as follows:  What is Percy's cost of goods sold budget for April?
A)$150,150 
B)$138,600 
C)$120,900 
D)$111,600

Quizplus · Accepted Answer

Step 1: Calculate the amount of beets needed for production
12,000 jars x 1.2 pounds of beets per jar = 14,400 pounds of beets

Step 2: Calculate the amount of direct labor required
Assuming an 8-hour workday, 60 minutes for 20 jars is equal to 3 minutes per jar.
12,000 jars / 20 jars per 3 minutes = 2,400 3-minute intervals
2,400 x 3 minutes per jar / 60 minutes per hour = 120 hours

Step 3: Calculate the cost of direct materials
14,400 pounds of beets x $0.70 per pound = $10,080

Step 4: Calculate the cost of direct labor
120 hours x $16 per hour = $1,920

Step 5: Calculate the total manufacturing cost
$10,080 + $1,920 = $12,000

Step 6: Calculate the cost of goods sold
Cost of goods sold = Beginning Finished Goods Inventory + Cost of goods manufactured - Ending Finished Goods Inventory
Assuming that there is no beginning finished goods inventory:
Cost of goods sold = $12,000 - (0.25 x 16,000 jars x $15 per jar) = $138,600

Percy's Pickled Snacks Produces Several Types of Pickled Vegetables