Question

Suppose Chef City manufactures cast iron skillets. One model is a 10-inch skillet that sells for $28. Chef City projects sales of 625 10-inch skillets per month. The production costs are $5 per skillet for direct materials, $2 per skillet for direct labor, and $3 per skillet for manufacturing overhead. Chef City has 60 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 25% of the next month's sales. Selling and administrative expenses for this product line are $1,000 per month. Chef City is budgeted to produce 721 skillets in July with a $10 production cost per skillet.

Compute the budgeted cost of goods sold for July.

A) $5,887
B) $7,810
C) $7,210
D) $6,250

Please show how anser is calculated.

Answer 1

The correct answer is D.

Step-by-step explanation:

Giving the following information:

Chef City projects sales of 625 10-inch skillets per month. The production costs are $5 per skillet for direct materials, $2 per skillet for direct labor, and $3 per skillet for manufacturing overhead. Chef City has 60 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 25% of the next month's sales. Selling and administrative expenses for this product line are $1,000 per month. Chef City is budgeted to produce 721 skillets in July with a $10 production cost per skillet.

COGS= units sold* manufacturing cost

COGS= 625*10= 6,250