Question

Preparing an Ending Finished Goods Inventory Budget Andrews Company manufactures a line of office chairs. Each chair takes $14 of direct materials and uses 1.9 direct labor hours at $16 per direct labor hour. The variable overhead rate is $1.20 per direct labor hour, and the fixed overhead rate is $1.60 per direct labor hour. Andrews expects to have 675 chairs in ending inventory. There is no beginning inventory of office chairs.
Required:1. Calculate the unit product cost. (Note: Round to the nearest cent.)$2. Calculate the cost of budgeted ending inventory. (Note: Round to the nearest dollar.)$

Answer 1

Answer:

1) Cost per unit $50.00

2) Cost of budgeted closing inventory $33,561

Explanation:

Cost per unit of product

Under absorption costing, inventory and units produced are valued at he full cost per unit. The full cost per unit is calculated as follows:

Direct material + Direct Labour + Variable OH. + Fixed Production OH

Cost per unit for Andrew Company:

= 14 +( 1.9 × 16) + (1.9×1.2 ) + (1.9 ×1.60)

= $49.72

= $50 to the nearest dollar

Cost of budgeted ending inventory

= inventory units × unit cost

= 675 × $49.72

= $33,561

1) Cost per unit $50.00

2) Cost of budgeted closing inventory $33,561