Question

A company has the following annual budget data: Beginning finished goods inventory 40,000 units Sales 70,000 units Ending finished goods inventory 30,000 units Direct materials $10 per unit Direct labor $20 per unit Variable factory overhead $5 per unit Selling costs $2 per unit Fixed factory overhead $80,000 What are total budgeted production costs for the year

Answer 1

Answer:

$2,180,000

Explanation:

For computing the production cost first we have to find out the number of units produced which is shown below:

= Sales units + ending inventory units - beginning inventory units

= 70,000 units + 30,000 units - 40,000 units

= 60,000 units

Now the total budgeted production cost is

= (Direct material per unit + direct labor per unit + variable overhead per unit) × number of units produced + fixed factory overhead cost

= ($10 + $20 + $5) × 60,000 units + $80,000

= $2,180,000

We simply applied the above formula