Suppose Cook Plus manufactures cast iron skillets. One model is a? 10-inch skill

Question

Suppose Cook Plus manufactures cast iron skillets. One model is a? 10-inch skillet that sells for $32. Cook Plus projects sales of 525 10-inch skillets per month. The production costs are $13 per skillet for direct? materials, $2 per skillet for direct? labor, and $1 per skillet for manufacturing overhead. Cook Plus has 40 10-inch skillets in inventory at the beginning of July but wants to have an ending inventory equal to 30?% of the next? month's sales. Selling and administrative expenses for this product line are $1,100 per month. Cook Plus has budgeted cost of goods sold of $8,400 for July.

Compute the budgeted gross profit for July.

A. $13,456

B. $8,400

C. $12,176

D. $7,120

Explanation / Answer

OPTION B $8,400

FORMULA FOR GROSS PROFIT = SALES - COST OF GOODS SOLD.

HERE SALES =$32 × 525 = $16,800

COST OF GOODS SOLD = $8,400

GROSS PROFIT = $16,800-$8,400

= $8,400

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