Preparing an Ending Finished Goods Inventory Budget
Andrews Company manufactures a line of office chairs. Each chair takes $14 of direct materials and uses 1.9 direct labor hours at $16 per direct labor hour. The variable overhead rate is $1.20 per direct labor hour, and the fixed overhead rate is $1.60 per direct labor hour. Andrews expects to have 675 chairs in ending inventory. There is no beginning inventory of office chairs.
Required:
1.
Compute unit cost of the product.
Ending Finished Goods Inventory Budget:
Ending finished goods inventory budget is an operating budget. It is prepared to know the expected value of closing inventory and is computed by multiplying closing units of inventory with unit cost.
Computation of unit cost:
Particulars | Amount ($) |
Material cost | 14.00 |
Add: Labor cost | 30.40 |
Add: Variable overhead |
2.
Compute cost of budgeted ending inventory.
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