The Classy Cats Company has budgeted for sales of 100 000 units of its product for the year. Expected unit costs, based on past experience, should be $60 for direct materials, $40 for direct labour and $30 for manufacturing overhead. Assume no beginning and ending work in process inventories. Classy Cats begins the year with 40 000 finished units on hand and budgets the ending finished goods inventory at 10 000 units. Compute the budgeted production in units and dollars.
A) 70 000 units @ $100 = $7 000 000
B) 70 000 units @ $130 = $9 100 000
C) 150 000 units @ $100 = $15 000 000
D) 150 000 units @ $130 = $19 500 000

Question

Quizplus · Accepted Answer

To calculate the budgeted production, we need to first calculate the total units needed to meet the sales and ending inventory requirements:

Total units needed = Budgeted sales + Ending inventory - Beginning inventory
Total units needed = 100 000 + 10 000 - 40 000
Total units needed = 70 000 units

Next, we can use the expected unit costs to calculate the budgeted production in dollars:

Budgeted production = Total units needed x Expected unit costs
Budgeted production = 70 000 units x ($60 + $40 + $30)
Budgeted production = 70 000 units x $130
Budgeted production = $9 100 000

Therefore, the best choice is B.

The Classy Cats Company Has Budgeted for Sales of 100