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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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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. 1. Calculate the unit product cost. (Note: Round to the nearest cent.)
  2. 2. Calculate the cost of budgeted ending inventory. (Note: Round to the nearest dollar.)

1.

To determine

Compute unit cost of the product.

Explanation

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:

ParticularsAmount ($)
Material cost 14.00
Add: Labor cost (1.9 hours per unit×$16 per hour) 30.40
Add: Variable overhead (1

2.

To determine

Compute cost of budgeted ending inventory.

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