Denver Corporation has the following sales forecast for the next quarter: July, 4,000 units; August, 4,800 units; September, 5,600 units
Sales totaled 3,200 units in June.The June ending finished goods inventory was 800 units.End-of-month finished goods inventory levels are planned to be equal to 30 percent of the next month's planned sales.Records showed that each unit is budgeted at 2 pounds of materials costing $3 per pound.Direct labor was budgeted at .5 direct labor hours per unit at a wage of $20 per hour.Budgeted variable overhead is $1.50 per direct labor hour.Fixed overhead is budgeted at $250,000 for the year, and 50,000 units are expected to be produced.
-
The beginning finished inventory is valued at $31,320.
After preparing a finished goods inventory budget for August, what is the cost of goods sold for August?
A) $104,400
B) $109,620
C) $67,860
D) $140,940

Question

Quizplus · Accepted Answer

The cost of goods sold for August is the sum of the beginning finished goods inventory, the cost of goods manufactured, and the ending finished goods inventory, minus the beginning finished goods inventory.The beginning finished goods inventory is valued at $31,320.The cost of goods manufactured is equal to the direct materials cost, the direct labor cost, and the variable overhead cost.The direct materials cost is equal to the number of units produced multiplied by the cost per pound of materials multiplied by the number of pounds of materials per unit.The direct materials cost is equal to 4,800 units * $3 per pound * 2 pounds per unit = $28,800.The direct labor cost is equal to the number of units produced multiplied by the direct labor hours per unit multiplied by the wage per hour.The direct labor cost is equal to 4,800 units * .5 direct labor hours per unit * $20 per hour = $48,000.The variable overhead cost is equal to the number of units produced multiplied by the variable overhead cost per direct labor hour.The variable overhead cost is equal to 4,800 units * $1.50 per direct labor hour = $7,200.The cost of goods manufactured is equal to $28,800 + $48,000 + $7,200 = $84,000.The ending finished goods inventory is equal to 30% of the next month's planned sales.The next month's planned sales are 5,600 units.The ending finished goods inventory is equal to 30% * 5,600 units = 1,680 units.The cost of goods sold is equal to $31,320 + $84,000 + $1,680 - $31,320 = $104,400.Therefore, the cost of goods sold for August is $104,400.

Denver Corporation Has the Following Sales Forecast for the Next