Question

Rerun Manufacturing Company is in the process of preparing its 2016 budget and is anticipating the following changes:

25% increase in the number of units sold.
15% increase in the direct material unit cost.
10% increase in the direct labor cost per unit.
8% increase in the manufacturing overhead cost per unit.
12% increase in the selling price.
5% increase in the administrative expenses.

Rerun does not keep any units in inventory.
The composition of the cost of finished products during 2015 for materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2015 is as follows:

Sales (38,000 units)	$	532,000
Less sales returns		26,600
Net sales		505,400
Cost of Goods Sold		330,000
Gross Profit					$	175,400
Selling Expenses	$	68,000
Admin.Expenses		38,000				106,000
Net Income					$	69,400

What is the estimated cost of goods sold for 2016 assuming the number of units sold does not change?

Answer 1

Answer: Given data → Reorun manufacturing company is in the porocess of preparing its budget for 2016. → Anticipating the following changes * 25% increase in the number of units sold * 154. increase in the divtect material unit cost * 104 increase in the dissect labour Cost per unit * 08% incurease in the manufactusting overhead * lay increase in Selling price *54. increase in administrative expenses → The composition of the cost of finished products dooting 2015 for material, labour factory overhead is 3:2:1 Material 316 labowo - 2167 Manufacturing = F16 ] Overhead

Calculation of the of goods sold poroducts (3:2:1) composition for the of the cost year 2015 on present 7 Cost per Unit Revised I cost per lunile Amount units particubsol cost of Goods Sold: Material $3,30.000 ** 316 $1,65.000 36.000 $4.34 Direct 1544.34 +15% $ 5.00 10% 2.89 +10% $3.30,000 x216 $10,000 labour 38,000 $2.89 $3-18 factory Overhead $3.30,000 XV16 $55.000 38.000 $1.44 84.1.44 +8y. 1-$1.55 Estimated cost Agsuming the not change of goods sold fout 2016 number of onits Sold does Revised cost pese Unit Units. Amount povrticolaus Cost of goods Sold: Material labova factory overhead Tansk or am Sold 38.000 $ 5.00 $ 1,90,000 38.000 $ 120,840 $ 3.18 | $1.55 58.00 $ 58,900 ITE 2 a 700