Question

Ending Finished Goods Inventory Budget

Play-Disc makes Frisbee-type plastic discs. Each 12-inch diameter plastic disc has the following manufacturing costs:

Direct materials	$1.70
Direct labor	0.45
Variable overhead	0.80
Fixed overhead	1.90
Total unit cost	$4.85

For the coming year, Play-Disc expects to make 300,000 plastic discs, and to sell 284,000 of them. Budgeted beginning inventory in units is 19,000 with unit cost of $4.85. (There are no beginning or ending inventories of work in process.)

Required:

1. Prepare an ending finished goods inventory budget for Play-Disc for the coming year. If required, round your answers to the nearest cent.

Play-Disc
Ending Finished Goods Inventory Budget
For the Coming Year
Unit costs:
	$
Overhead:
Total cost per unit	$
Total ending inventory cost	$

2. What if sales increased to 294,000 discs? How would that affect the ending finished goods inventory budget? Calculate the value of budgeted ending finished goods inventory.
Finished goods inventory has   to $

Answer 1

1. Ending Finished goods inventory budget:-

Production = 300,000 plastic discs

Sale = 284,000 plastic discs

Opening Stock = 19,000 plastic discs

In order to calculate ending finished goods inventory units we have use the following formula

Opening Stock + Produced units - Closing stock = Sale

19,000 + 300,000 - closing stock = 284,000

319,000 - closing stock = 284.000

-Closing Stock = 284,000 - 319,000

-Closing stock = -35,000

Closing Stock = 35,000 plastic discs

Ending Finished goods inventory budget (in units) = 35,000 plastic discs

Ending Finished goods inventory budget (in $) = 35,000 plastic discs*4.85 per unit = $ 169,750

2. If sale increase to 294,000 discs the ending finished goods inventory budget:-

Production = 300,000 plastic discs

Sale = 294,000 plastic discs

Opening Stock = 19,000 plastic discs

In order to calculate ending finished goods inventory units we have use the following formula

Opening Stock + Produced units - Closing stock = Sale

19,000 + 300,000 - closing stock = 294,000

319,000 - closing stock = 294.000

-Closing Stock = 294,000 - 319,000

-Closing stock = -25,000

Closing Stock = 25,000 plastic discs

Ending Finished goods inventory budget (in units) = 25,000 plastic discs

Ending Finished goods inventory budget (in $) = 25,000 plastic discs*4.85 per unit = $ 121,250