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. Calculate the unit product cost. (Note: Round to the nearest cent.) $2. Calculate the cost of budgeted ending inventory. (Note: Round to the nearest dollar.) $

Question

Konnor Stanton

Business

8 April, 21:12

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. Calculate the unit product cost. (Note: Round to the nearest cent.) $2. Calculate the cost of budgeted ending inventory. (Note: Round to the nearest dollar.) $

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Answers (1)

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Darryl Joseph · Answer 1

1) Cost per unit $50.00

2) Cost of budgeted closing inventory $33,561

Explanation:

Cost per unit of product

Under absorption costing, inventory and units produced are valued at he full cost per unit. The full cost per unit is calculated as follows:

Direct material + Direct Labour + Variable OH. + Fixed Production OH

Cost per unit for Andrew Company:

= 14 + (1.9 * 16) + (1.9*1.2) + (1.9 * 1.60)

= $49.72

= $50 to the nearest dollar

Cost of budgeted ending inventory

= inventory units * unit cost

= 675 * $49.72

= $33,561

1) Cost per unit $50.00

2) Cost of budgeted closing inventory $33,561