Preparing cost of goods sold budget Prepare a cost of goods sold budget for the Summit Manufacturing Company for the year ended December 31, 2011, from the following estimates. Inventories of production units: Work in Process Finished Goods January 1, 2011 . . . $28,500 $19,300 December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . 23,700 22,400 Direct materials purchased during the year, $854,000; beginning inventory of direct materials, $31,000; and ending inventory of direct materials, $26,000. Totals from other budgets included: Direct labor cost $539,500 Total factory overhead costs 818,000

COGS= $2,218,200

Explanation:

Giving the following information:

WIP:

Beginning= 28,500

Ending= 23,700

Finished goods:

Beginning= 19,300

Ending= 22,400

Direct materials:

Purchased= 854,000

Beginning inventory= 31,000

Ending inventory= (26,000)

Direct material used= 859,0000

Totals from other budgets included:

Direct labor cost= $539,500

Total factory overhead costs= $818,000

First, we need to calculate the cost of goods manufactured:

cost of goods manufactured= beginning WIP + direct materials used + direct labor + allocated manufacturing overhead - Ending WIP

cost of goods manufactured= 28,500 + 859,000 + 539,500 + 818,000 - 23,700

cost of goods manufactured= $2,221,300

Now, we can calculate the cost of goods sold:

COGS= beginning finished inventory + cost of goods manufactured - ending finished inventory

COGS= 19,300 + 2,221,300 - 22,400

COGS= $2,218,200

one of the appeals of a sole proprietorship is that business expenses are kept separate from your personal income tax return

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