Question

Rerun Manufacturing Company is in the process of preparing its 2020 budget and is anticipating the following changes: 30% increase in the number of units sold. 25% increase in the direct material unit cost. 20% increase in the direct labor cost per unit. 12% increase in the manufacturing overhead cost per unit. 20% increase in the sales price. 6% increase in the administrative expenses.

Answer 1

$403,485

Step-by-step explanation:

The computation is shown below;

Composition of direct material, direct labor and factory overhead in the ratio of 3:2:1

So,

Direct Materials = $333,000 × 3 ÷ 6 =$166,500

Direct Labor = $333,000 × 2 ÷ 6 = $111,000

Factory Overhead = $333,000 × 1 ÷ 6 = $55,500

Now the Revised Cost of Goods Sold for the year 2020 is

Direct Materials = $166,500 × 125% = $208,125

Direct Labor = $111,000 × 120% = $133,200

Factory Overhead = $55,500 × 112% = $62,160

finally the estimated cost of goods sold for the year 2020 is

= $208,125 + $133,200 + $62,160

= $403,485