Merchant Co. expects to sell 10,000 units at $120 each. Each unit is expected to
ID: 2387785 • Letter: M
Question
Merchant Co. expects to sell 10,000 units at $120 each. Each unit is expected to require 2lbs. of material @ $10/lb. and 3 direct labor hours @ $5/DLH. The overhead rate is estimated to be $15/DLH. The beginning inventories are: DM 1,000 lbs. and Finished Goods 2,000 units. The budgeted ending inventories are: DM 2,000 lbs. and Finished Goods 1,000 units.a. What is Merchant Co's budgeted sales (in $)?
b. What is Merchant Co's budgeted production (in units)?
c. Assuming a production of 9,500 units, what is the budgeted materials purchase (in lbs.& $)?
d. Based on your answer to (b), what is the budgeted cost per unit?
e. Based on your answer to (b), what is the budgeted cost of goods sold?
f. Based on your answer to (b), what is the budgeted cost for DL & FOH respectively?
Explanation / Answer
a) Budegeted sales = 10000*120 1200000 b) Budegeted prodution = Closing+sales - opening = 1000+10000-2000 9000 =9000 units C) In a prodcution of 9,500 units Raw material requires = 9500*2 = 19000lbs Budgeted material purchase = closing + required for production -opening = 2000+19000-1000 20000 =20,000 lbs Cost for purchasing 20000 lbs = 20000*2 = $40000 d) Direct materials = 2*10 20 Direct labor = 3* 5 15 Overhead = 3*15 45 Budegted cost per unit 80 f) Budgeted cost of Direct labor = 9000 * 3*5 = $135,000 135000 Budegted cost of factory overhead = 9000 * 3*15 = $405,000 405000