Question

When preparing the cost of goods sold budget, ________.

A) ignore balances in Finished Goods Inventory
B) start by calculating the projected cost to produce each unit
C) ignore the inventory costing method
D) multiply units produced by the total projected cost per unit

Answer 1

To prepare the cost of goods sold budget, one should start by calculating the projected cost to produce each unit, considering all relevant production costs and inventory adjustments.

Step-by-step explanation:

When preparing the cost of goods sold budget, B) start by calculating the projected cost to produce each unit. This involves determining the direct materials, direct labor, and manufacturing overhead costs associated with producing each unit of inventory. It is critical to include the beginning and ending inventories in the calculation to accurately determine the total cost of goods sold. This process helps companies predict how much it will cost to sell their products during a specific period and is essential for creating an effective budget.