Mercury Bag Company produces cases of grocery bags. The managers at Mercury are
ID: 2518126 • Letter: M
Question
Mercury Bag Company produces cases of grocery bags. The managers at Mercury are trying to develop budgets for the upcoming quarter. The following data have been gathered. Projected sales in units Selling price per case Inventory at the beginning of the quarter Target inventory at the end of the quarter Direct labor hours needed to produce one case Direct labor wages Direct materials cost per case Variable manufacturing overhead cost per case Fixed overhead costs for the upcoming quarter 1,990 cases $ 240 150 cases 100 cases 2 hours 10 per hour $220,000 a. Using the above information, develop Mercury's sales forecast in dollars and production schedule in units. b. What is Mercury's budgeted variable manufacturing cost per case? c. Prepare Mercury's manufacturing cost budget d. What is the projected ending value of the Inventory account?Explanation / Answer
A. Sales forecast= 1990*$240=$477600
Production units= sales units+ closing inventory-opening inventory=1990+100-150=1940 units
B. Budgeted variable manufacturing cost per case
Direct Material: $8
Direct Labour: $10/hr*2hrs per case: $20
Variable overhead:$6
Total: $34 per case
C. Manufacturing cost budget
Variable overheads: $34*1940 cases: $65960
Fixed overheads: $220000
Total: $285960
D. Value of ending inventory
$285960*100cases/ 1940 cases=$14740
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