Cost Accting- HW 1
Answer D is
The budgeted payment to the vendor
is $300,000. Of this amount,
$100,000 is to settle the beginning
balance of accounts payable.
the inventory purchases
for Year 1 equal $350,000 [($300,000
cash paid – $100,000 beginning
accounts payable) + ($100,000 ×
150%) ending accounts payable]. The
cost of goods sold for a retailer equals
purchases adjusted for the change in
inventory. Given the budget
assumptions, purchases is also the
cost of goods sold because beginning
and ending inventory are the same.
Sales are therefore $420,000
($350,000 purchases × 120%),
the budgeted gross margin is $70,000
($420,000 sales – $350,000 COGS).
Indirect labor is a
Answer C is
Conversion costs include direct labor and factory overhead. Because indirect labor
is a component of factory overhead, indirect labor is a conversion cost.