Hawle Manufacturing Company is in the process of preparing its 2012 budget and i

Question

Hawle Manufacturing Company is in the process of preparing its 2012 budget and is anticipating the following changes 10% increase in the number of units sold 20% increase in the direct material unit cost15% Increase In the direct labor cost per unit 10% Increase in the manufacturing overhead cost per unit 15% Increase in the marketing price14% increase in the administrative expenses Hawle does not keep any units in inventory The composition of the cost of finished products dining 2012 for materials, direct labor, and factory overhead, respectively, was in the ratio of 3 to 2 to 1 The condensed income statement for 2012 is as follows What Is the estimated cost of goods sold tor 2012 assuming the number o(units sold does not change? $623,000 $362,850 $430,500 $651,320

Explanation / Answer

Cost of goods sold consists of direct material, direct labour and factory overhead.

direct material: direct labour :factory overhead = 3:2:1

Direct material = (3/6) * $369000 = $184500

Direct labour = (2/6) * $369000 = $123000

Factory Overhead = (1/6) * $369000 = $61500

Revised costs of goods sold:

Direct material = $184500 x 1.2 = $221400

Direct labour = $123000 x 1.15=$141450

Factory Overhead = $61500 x 1.10 = $67650

Revised cost of goods sold = $221400+$141450+$67650 = $430500

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