Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 2

Production and purchases budgets Olympia Productions, Inc., makes award medallions that are attached to ribbons. Each medallion requires 18 inches of ribbon. The sales forecast for February is 8,000 medallions. Estimated beginning inventories and desired ending inventories for February are:

	Estimated Beginning Inventory	Desired Ending Inventory
Medallions	4,000	3,200
Ribbon (yards)	200	80

Required:

a. Calculate the number of medallions to be produced in February.

---

b. Calculate the number of yards of ribbon to be purchased in February.

Step 1 of 6

a.

Calculate the number of medallions to be produced:

Cost of goods sold model:

Cost of goods sold model is used to calculate the actual cost of obtaining raw material plus producing the final finished goods that are available for sale.

Using the cost of goods sold model, the following is the calculation of medallions produced in February:

Table 1: COST OF GOODS SOLD MODEL

Particulars	Medallions
Beginning inventory	4,000
Add: Production	?
Goods available for sale	?
Less: Ending inventory	(3,200)
Quantity sold	8,000