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		1,600	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

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?

Complete this question by entering your answers below.

Using the above information, develop Mercury's sales forecast in dollars and production schedule in units.

A.

	Budgeted sales (in dollars) Planned production (cases)

B.

What is Mercury's budgeted variable manufacturing cost per case?

	Total variable cost per case

C.

Prepare Mercury's manufacturing cost budget. (Round your cost per unit answer to 2 decimal places.)

	Variable manufacturing costs: Direct labor Direct materials Variable overhead Total variable manufacturing costs Add: Fixed manufacturing overhead Total cost of finished goods manufactured Manufacturing cost per unit

D.

What is the projected ending value of the Inventory account? (Round your intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)

	Ending inventory value

Answer 1

SOLUTION

A. Sales forecast-

Budgeted sales (cases) (A)	1,600
Selling price per case (B)	$240
Budgeted sales (in dollars) (A*B)	$384,000

Production schedule-

Budgeted sales (cases)	1,600
Target ending inventory	100
Cases budgeted to be available for sale	1,700
Less: Beginning inventory	(150)
Planned production (cases)	1,550

B.

Particulars	Amount ($)
Direct materials	8
Direct labor (2 hours * $10 per hour)	20
Variable overhead	6
Total variable cost per case	34

C.

Variable manufacturing costs:
Direct labor (1,550*$20)	31,000
Direct materials (1,550*$8)	12,400
Variable overhead (1,550*$6)	9,300
Total variable manufacturing costs	52,700
Add: Fixed manufacturing overhead	220,000
Total cost of finished goods manufactured	272,700
Units	1,550
Manufacturing cost per unit	175.94

D. Ending inventory value = Target ending inventory * Manufacturing cost per unit

= 100 * $175.94 = $17,594