Question

Kohl Company makes computer bags. Its sales budget for four months is:

Sales
                     Month
  

                      December 15,000

                      January 20,000

                       February 40,000

                      March 60,000

Kohl's policy is that ending inventory of finished bags should equal 30% of the next
month's sales. Beginning inventory (December 1) is 4,500 bags. Budgeted production cost is $5.00

Each bag required 1.5 yards of ballistic nylon. The ending inventory policy for nylon is
that 20% of the following month's production needs must be on hand. On December 1, Kohl
had 3,300 yards of nylon in inventory. Budget Ballistic Nylon cost is $0.75/yard.

1. Compute the budgeted Ending Finished Goods Inventory for January:

2. Compute the Budgeted Beginning Finished Goods Inventory for January:

3. What is the budgeted COGM for bags in January?

4. Compute the budgeted Ending Materials Inventory for December:

5. What is the budgeted Cost of Goods Sold for January?

Answer 1

	Dec	Jan	Feb	Mar
Budgeted Sales	15000	20000	40000	60000
Add: Desired ending Inventory	6000	12000	18000
Total required	21000	32000	58000	60000
Less: beginning Inventory	4500	6000	12000
Units to be produced	16500	26000	46000
Raw material per unit	1.5	1.5	1.5
Yards required for production	24750	39000	69000
Add: Desired ending Inventory	7800	13800
Total required	32550	52800
Less: beginning Inventory	3300	7800
Required Purchases	29250	45000
Cost per yard	0.75	0.75
Budgeted cost	21937.5	33750
Hence, the answers are
Budgeted ending FG inventory = 12000 units
2.Beginning = 6000 units
3.Budgeted COGM in January = 26000*5 = $130,000
4.Ending material inventory = 7800 yards
5.COGS = 20,000*5 = $100,000