Question

Cost of Goods Sold Budget

Magnolia Candle Inc. budgeted production of 74,200 candles in 2016. Wax is required to produce a candle. Assume eight ounces (one-half of a pound) of wax is required for each candle. The estimated January 1, 2016, wax inventory is 2,500 pounds. The desired December 31, 2016, wax inventory is 2,100 pounds. Candle wax costs $4.10 per pound.

Each candle requires molding. Assume that 12 minutes are required to mold each candle. Molding labor costs $14.00 per hour.

Prepare a cost of goods sold budget for Magnolia Candle Inc., using the information above. Assume the estimated inventories on January 1, 2016, for finished goods and work in process were $9,800 and $3,600, respectively. Also assume the desired inventories on December 31, 2016, for finished goods and work in process were $12,900 and $3,500, respectively. Factory overhead was budgeted at $109,600. Round your interim calculations to nearest cent, if required.

Magnolia Candle Inc.
Cost of Goods Sold Budget
For the Year Ending December 31, 2016
Finished goods inventory, January 1, 2016			$
Work in process inventory, January 1, 2016		$
Direct materials:
Direct materials inventory, January 1, 2016	$
Direct materials purchases	$
Cost of direct materials available for use	$
Less direct materials inventory, December 31, 2016	$
Cost of direct materials placed in production	$
Direct labor		$
Factory overhead		$
Total manufacturing costs		$
Total work in process during the period		$
Less work in process inventory, December 31, 2016			$
Cost of goods manufactured			$
Cost of finished goods available for sale			$
Less finished goods inventory, December 31, 2016			$
Cost of goods sold			$

Answer 1

Magnolia Candle Inc
Cost of goods sold budget
For the year ending December 31, 2016
Finished goods inventory, January 1, 2016			$      9,800
Work in process inventory, January 1, 2016		$      3,600
Direct materials:
Direct materials inventory, January 1, 2016 (2,500*$4.10)	$    10,250
Direct materials purchases ((74,200*0.5)+2,100-2,500)*$4.10)	$ 150,470
Cost of direct materials available for use	$ 160,720
Less direct materials inventory, December 31, 2016 (2,100*$4.10)	$      8,610
Cost of direct materials placed in production		$ 152,110
Direct labor (74,200*12/60*$14)		$ 207,760
Factory overhead		$ 109,600
Total manufacturing costs		$ 469,470
Total work in process during the period		$ 473,070
Less work in process inventory, December 31, 2016		$      3,500
Cost of goods manufactured			$ 469,570
Cost of finished goods available for sale			$ 479,370
Less finished goods inventory, December 31, 2016			$    12,900
Cost of goods sold			$ 466,470

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