Question

Answer the following questions using the information below:

Sherry and John Enterprises are using the kaizen approach to budgeting for 2015. The budgeted income statement for January 2015 is as follows:

Sales (168,000 units) $1,000,000
Less: Cost of goods sold 600,000
Gross margin 400,000
Operating expenses 300,000
(includes $50,000 of fixed costs)
Operating income $ 100,000

Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month.

*6) What is budgeted cost of goods sold for March 2015?*
A) $588,060
B) $592,000
C) $600,000
D) $594,000
Objective 6.6

Answer 1

To calculate the budgeted cost of goods sold for March 2015 using the kaizen approach, we need to know the decrease in cost of goods sold per month. option a is answer

Step-by-step explanation:

To calculate the budgeted cost of goods sold for March 2015, we need to know the decrease in cost of goods sold per month. According to the information given, the cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. So, the budgeted cost of goods sold for March can be calculated as follows:

Cost of goods sold for January 2015 = $600,000 Decrease rate per month = 1% Number of months from January to March = 2 Decrease in cost of goods sold = ($600,000 * 1%) * 2 = $12,000 Budgeted cost of goods sold for March 2015 = $600,000 - $12,000 = $588,000 Given that the cost of goods sold and variable operating expenses are budgeted to decline by 1% per month, the budgeted cost of goods sold for March can be calculated by subtracting the decrease in cost from the initial cost of goods sold. option a is answer