Colorado Corporation has the following sales forecast for the next quarter: July
ID: 2553819 • Letter: C
Question
Colorado Corporation has the following sales forecast for the next quarter:
July, 4,000 units; August, 4,800 units; September, 5,600 units
Sales totaled 3,200 units in June. The June ending finished goods inventory was 800 units. End-of-month finished goods inventory levels are planned to be equal to 30 percent of the next month's planned sales. Records showed that each unit is budgeted at 2 pounds of materials costing $3 per pound. Direct labor was budgeted at .5 direct labor hours per unit at a wage of $20 per hour. Budgeted variable overhead is $1.50 per direct labor hour. Fixed overhead is budgeted at $250,000 for the year, and 50,000 units are expected to be produced.
After preparing a finished goods inventory budget for August, what is the total ending inventory cost?
Explanation / Answer
Answer:
total ending inventory cost =$36,540
Working notes for the above answer is as under
finished goods inventory budget for August
5,600 × 0.30
= 1,680 units
finished goods inventory budget for August =1680 units
DM 2 × $3
6
DL .5 × $20
10
VOH .5 × $1.50
0.75
FOH $250,000/50,000
5
Total unit cost
21.75
Now inventory cost
=1,680 units × $21.75
= $36,540
total ending inventory cost =$36,540
DM 2 × $3
6
DL .5 × $20
10
VOH .5 × $1.50
0.75
FOH $250,000/50,000
5
Total unit cost
21.75