Question

Answer the following questions using the information below:

Kason Inc., expects to sell 20,000 pool cues for $12.00 each. Direct materials costs are $2.00, direct manufacturing labor is $4.00, and manufacturing overhead is $0.80 per pool cue. The following inventory levels apply to 2016:
Beginning inventory Ending inventory
Direct materials 24,000 units 24,000 units
Work-in-process inventory 0 units 0 units
Finished goods inventory 2,000 units 2,500 units

*30) On the 2016 budgeted income statement, what amount will be reported for cost of goods sold?*
A) $139,800
B) $136,000
C) $132,600
D) $153,000

Answer 1

The cost of goods sold for Kason Inc. is calculated by totaling the production costs per unit, considering the inventory levels, and then multiplying the total cost per unit by the number of pool cues actually sold. The correct COGS for the 2016 budgeted income statement is $132,600.

Step-by-step explanation:

To calculate the cost of goods sold (COGS) for Kason Inc., you need to consider the cost of producing the pool cues that were actually sold during the year.

First, calculate the total production costs by adding the direct materials, direct manufacturing labor, and manufacturing overhead per pool cue. Then, calculate the cost of the pool cues that were available for sale by considering the beginning inventory and the units produced. Lastly, adjust for the ending inventory to find the final COGS.

Step-by-Step Calculation:

Calculate total costs per unit:
Direct materials: $2.00
Direct manufacturing labor: $4.00
Manufacturing overhead: $0.80
Total Cost Per Unit: $2.00 + $4.00 + $0.80 = $6.80

Calculate total units available for sale:
Beginning Finished Goods Inventory: 2,000 units
+ Units Produced (20,000 units forecasted to be sold)
Total: 22,000 units

Adjust for ending finished goods inventory:
- Ending Finished Goods Inventory: 2,500 units
Total Units Sold: 22,000 units - 2,500 units = 19,500 units

Calculate COGS:
Total Cost Per Unit x Total Units Sold
$6.80 x 19,500 units = $132,600

Therefore, the amount reported for cost of goods sold on the 2016 budgeted income statement will be $132,600 (Option C).