Question

Atlas Company plans to sell 145,000 units in November and 190,000 units in December. Atlas's policy is that 15% of the following month's sales must be in ending inventory. On November 1, there were 21,750 units in inventory. It takes 35 minutes of direct labor time to make one unit. Direct labor wages average $19 per hour. Variable overhead is applied at the rate of $7 per direct labor hour. Fixed overhead is budgeted at $60,500 per month. What is the budgeted production in units for November?
a. 121,000 units
b. 151,750 units
c. 100,000 units
d. 125,600 units
e. 140,000 units

Answer 1

Answer:

Option (b) is correct.

Explanation:

Given that,

Sales =  145,000 units

Desired ending inventory =   28,500 units

Beginning inventory =  21,750

Budgeted production in units for November:

= Sales + desired ending inventory - Beginning inventory

= 145,000 units + (190,000 × 15%) - 21,750

=  145,000 units + 28,500 - 21,750

= 151,750 units