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 1,220casesSelling price per case$240 Inventory at the beginning of the quarter 150casesTarget inventory at the end of the quarter 100casesDirect labor hours needed to produce one case 2hoursDirect labor wages$10per hourDirect 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?

Answer 1

Part-a

Computation of Sales Forcast and PrdocutionS chedule
Budgeted Sales (a)	1220
Selling Price (B)	$240.00
Budgeted Sales in $ (aXb)	$292,800.00
Production Schedule
Budgeted Sales	1220
Desired Ending Inventory	100
Total Needs	1320
Less: begining Inventory	-150
Budgted Production	1170

Part-b: Computation of Variable Manufacturing Cost per Case
Direct material	$8.00
Direct Labour	$10.00
Variable Overhead	$6.00
Total Varibale Manufacturign Cost per Case	$24.00

Part-C: Computation of Manufacturing Cost per Case
Total Variable Manufacturign Cost (24X 1170)	$28,080.00
Fixed Manufacturign Cost	$220,000.00
Total Cost of Goods Manufactured	$248,080.00
Manufacturign Cost per Unit (248080/1170)	$212.03

Part-d:

Endign inventory= Target Ending InventoryX Manufacturign cost per Unit

(100X212.03)=$21203