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ser-zykov [4K]
3 years ago
10

Barrington Bears has developed the following sales forecasts for the next few months. January 500, February 600, March 720, Apri

l 800 and May 770. BB has 80 bears on hand on Dec. 31. Normal ending inventory policy is to hold 20% of next month’s sales. Each bear needs .8 yards of fabric and two pounds of stuffing. Fabric is budgeted to cost $15 per yard and stuffing $4 per pound. Direct labor is paid $18 per hour. Each bear takes 40 minutes to hand-finish. Variable overheads total $21 per direct labor hour. Fixed overheads amount to $25,000 per month. Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end. Ten percent and 25% of next month’s stuffing and fabric needs respectively are planned for raw materials ending inventory each month. What are budgeted conversion costs for January?
$35,000
$37,400
$39,040
$41,200
None of the above
Business
1 answer:
Oduvanchick [21]3 years ago
5 0

Answer:

The correct answer is C.

Explanation:

Giving the following information:

Barrington Bears has developed the following sales forecasts for January 500 units.

BB has 80 bears on hand on Dec. 31. The normal ending inventory policy is to hold 20% of next month’s sales.

Direct labor is paid $18 per hour. Each bear takes 40 minutes to hand-finish. Variable overheads total $21 per direct labor hour. Fixed overheads amount to $25,000 per month.

First, we need to calculate the production for January.

Sales= 500 units

Ending inventory= (600*0.2)= 120 units

Beginning inventory= 80 (-)

Total= 540 units

Conversion costs= direct labor + manufacturing overhead

Direct labor= [(40/60)*540]*$18= $6,480

Variable overhead= 21*360 hours= $7,560

Fixed overhead= $25,000

Total conversion costs= $39,040

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