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. 15% increase in the manufacturing overhead cost per unit. 16% increase in the sales price. 6% increase in the administrative expenses. Rerun does not keep any units in inventory. The composition of the cost of finished products during 2019 for materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2019 is as follows: Sales (34,000 units) $ 510,000 Less sales returns 25,500 Net sales 484,500 Cost of Goods Sold 318,000 Gross Profit $ 166,500 Selling Expenses $ 64,000 Admin. Expenses 34,000 98,000 Net Income $ 68,500 What is the estimated cost of goods sold for 2020 assuming the number of units sold does not change?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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.
15% increase in the
16% increase in the sales price.
6% increase in the administrative expenses.
Rerun does not keep any units in inventory.
The composition of the cost of finished products during 2019 for materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2019 is as follows:
| Sales (34,000 units) | $ | 510,000 | |||||
| Less sales returns | 25,500 | ||||||
| Net sales | 484,500 | ||||||
| Cost of Goods Sold | 318,000 | ||||||
| Gross Profit | $ | 166,500 | |||||
| Selling Expenses | $ | 64,000 | |||||
| Admin. Expenses | 34,000 | 98,000 | |||||
| Net Income | $ | 68,500 | |||||
What is the estimated cost of goods sold for 2020 assuming the number of units sold does not change?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
