Kelita, Inc

question 54

Multiple Choice

Kelita, Inc., projects sales for its first three months of operation as follows: October November December
Credit sales $100,000 $150,000 $200,000
Cash sales 40,000 60,000 50,000
Total Sales $140,000 $210,000 $250,000
Inventory on October 1 is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale.
What is the projected cost of goods sold for October?

• A)$140,000
• B)$220,000
• C)$257,000
• D)$100,000

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Definitions:

Direct Labor

Labor costs that can be identified with a specific product or service.

Sales Variance

Captures the effect of quantity sold holding the mix of products sold constant.

Overhead Variances

The difference between actual overhead costs incurred and the standard or budgeted overhead costs.