BALI COMPANY HAS A POLICY OF MAINTAINING AN INVENTORY OF FINISHED...

56. Bali Company has a policy of maintaining an inventory of finished goods equal to 30 percent

of the following month's sales. For the forthcoming month of March, Bali has budgeted the

beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests

that

a. February sales are budgeted at 10,000 units less than March sales.

b. March sales are budgeted at 10,000 units less than April sales.

c. February sales are budgeted at 3,000 units less than March sales.

d. March sales are budgeted at 3,000 units less than April sales.

ITEMS 57 to 61 ARE BASED ON THE FOLLOWING INFORMATION:

The cost of goods sold section of Dale Corporation’s operating budget for 2015 is presented below:

Materials: Inventory, January 1 (16,000 units) P 960,000

Purchases 9,120,000

Available for use P10,080,000

Inventory, December 31 (18,500 units) 1,184,000 P 8,896,000

Labor 784,000

Factory overhead: Variable P 2,009,600

Fixed 1,120,000 3,129,600

Cost of goods manufactured (140,000 units) P12,809,600

Add finished goods inventory, January 1 (9,300 units) 744,000

Cost of goods available for sale P13,553,600

Less finished goods inventory, December 31 (3,300 units) 301,600

Budgeted cost of goods sold P13,255,000

The actual results for the first quarter of 2015 require the following changes in the budget

assumptions:

 The budgeted production for the year is expected to increase by 5,000 units.

During the first quarter, the company has already produced 25,000 units. The

balance of production will be scheduled in equal segments over the last 3 quarters

of the budget year.

 The expected finished goods inventory on January 1 dropped to only 9,000 units,

but its total value will not be revised anymore. The ending inventory value is

computed using the average manufacturing cost for the year.

 A new Labor Bill passed by Congress is expected to be signed into a law by the

President. The new law will take effect beginning the last quarter of the budget

year, including a provision for an increase of 8% in wage rates.

 The company uses the FIFO method in valuing its materials inventory. During the

first quarter, the company purchased 27,500 units of direct materials for

P1,760,000. The remaining direct materials requirement will be purchased evenly

for the last 9 months of the budget year. Effective July 1, 2015, the beginning of

the third quarter, direct materials cost is expected to increase by 5%. The

assumptions regarding the quantity of materials inventories at the beginning and

end of the year will remain unchanged.

 The variable factory overhead of P2,009,600 includes indirect materials and factory

supplies amounting to P889,600. It is computed at 10% of the cost of materials

used. The balance of the variable factory overhead varies directly with production.

 There will be no change in the budgeted fixed factory overhead cost.

Based on actual data for the first quarter, as well as the changes in assumptions and

estimates in the budgeted data for the year, the company’s accountant prepared a revised

budgeted cost of goods sold statement. This revised statement should show: