Mercury Bag Company produces cases of grocery bags. The managers at Mercury are

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.

  

a. Using the above information, develop Mercury's sales forecast in dollars and production schedule in units. (Budgeted sales in dollars, planned production in cases)

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?

Projected sales in units 1,700 cases Selling price per case $ 240 Inventory at the beginning of the quarter 150 cases Target inventory at the end of the quarter 100 cases Direct labor hours needed to produce one case 2 hours Direct labor wages $ 10 per hour Direct materials cost per case $ 8 Variable manufacturing overhead cost per case $ 6 Fixed overhead costs for the upcoming quarter $ 220,000

Explanation / Answer

Answer:- Mercury's sales forecast in dollars=Projected sales in units*Selling price per case

                                =1700 cases*$240 per case =$408000

Production schedule in units:-

Budgeted sales (cases)                                              1700

Target ending inventory                                             100

Cases budgeted to be available for sale                     1800

Less: Beginning inventory                                          150

Planned production (cases)                                         1650

b)- Mercury's budgeted variable manufacturing cost per case:-

Direct materials                                            $8

Direct labor (2 hours/case ×$10/hour)         $20

Variable overhead                                         $6

Total variable cost per case                         $34

c)- Mercury's manufacturing cost budget:-

Direct materials (1650 cases × $8/case) =    $13200

Direct labor (1650 cases × $20/case) =        $33000

Variable overhead (1650 cases × $6/case) = $9900

Total manufacturing cost                            = $56100

d)- The projected ending value of the Inventory account:-

      Closing inventory*manufacturing cost per unit

        =100 cases*$221.33 pr unit =$22133

Where:-

Calculation of manufacturing cost per unit Particluars Amount variable manufacturing costs $ Direct materials 13200 Direct Labor 33000 Variable overhead 99000 Total manufacturing costs 145200 Add:-Fixed manufacturing overhead 220000 Total cost of finished goods manufactured 365200 Manufacturing cost per unit $365200/1650 cases =$221.33

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