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: 1,690 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.

Budgeted Sales( in dollars ): ________

Planned Production ( In cases ): _______

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

Total variable cost per case: _______

c. Prepare Mercury's manufacturing cost budget.

Variable Manufacturing costs:

_______

_______

_______

_______

Total variable manufacturing costs: ____

Total cost of finished goods manufactured: ______

d. What is the projected ending value of the Inventory account?

Answer 1

a	Budgeted Sales (in dollars)=Projected sales in units*Selling price per case=1690*240=$ 405600
	Planned production (in cases):
						Cases
	Projected sales in units					1690
	Add:Target inventory at the end of the quarter					100
						1790
	Less:Inventory at the beginning of the quarter					150
	Planned production					1640
b.	Total variable cost per case:
						$
	Direct materials cost per case					8
	Direct labor wages per case				(10*2)	20
	Variable manufacturing overhead cost per case					6
	Total variable cost per case					34
c.	Variable Manufacturing costs:
	Planned production		(in cases)				1640
							$
	Direct materials cost					(1640*8)	13120
	Direct labor wages					(1640*20)	32800
	Variable manufacturing overhead cost					(1640*6)	9840
	Total variable manufacturing costs						55760
	Total cost of finished goods manufactured:
					$
	Total variable manufacturing costs				55760
	Fixed overhead costs				220000
	Total cost of finished goods manufactured				275760
d.	Projected ending value of the Inventory account=Target inventory at the end of the quarter*Cost per unit
	Cost per unit=Total cost of finished goods manufactured/Planned production=275760/1640=$ 168.15 per unit
	Projected ending value of the Inventory account=100*168.15=$ 16815