Question

Cost of goods sold budget

Pasadena Candle Inc. budgeted production of 785,000 candles for the year. Each candle requires molding. Assume that six minutes are required to mold each candle. If molding labor costs $18 per hour, determine the direct labor cost budget for the year. Wax is required to produce a candle. Assume 487,125 pounds of material will be purchased during the year. If candle wax costs $1.24 per pound, determine the direct materials purchases for the year.

Prepare a cost of goods sold budget for Pasadena Candle Inc. using the information above. Assume the estimated inventories on January 1 for finished goods and work in process were $200,000 and $41,250, respectively and direct materials wax inventory of 16,000 pounds. Also assume the desired inventories on December 31 for finished goods and work in process were $120,000 and $28,500, respectively and direct materials wax inventory of 12,500 pounds. Factory overhead was budgeted at $300,000. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

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

Answer 1

Pasadena Candle Inc.
Cost of Goods Sold Budget
For the Year Ending December 31
Finished goods inventory, January 1			$200,000
Work in process inventory, January 1		$41,250
Direct materials:
Direct materials inventory, January 1	$19,840
Direct materials purchases [487125 x $ 1.24]	$604,035
Cost of direct materials available for use	$623,875
Direct materials inventory, December 31	($15,500)
Cost of direct materials placed in production	$608,375
Direct labor [785000 x 6/60 x $18]	$1,413,000
Factory overhead	$300,000
Total manufacturing costs		$2,321,375
Total work in process during period		$2,362,625
Work in process inventory, December 31		($28,500)
Cost of goods manufactured			$2,334,125
Cost of finished goods available for sale			$2,534,125
Finished goods inventory, December 31			($120,000)
Cost of goods sold			$2,414,125