Larken has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced.What is budgeted manufacturing overhead for July?
A)$29,400
B)$41,000
C)$46,400
D)$17,000

Question

Quizplus · Accepted Answer

First, we need to calculate the total units needed for each month:

July: 4,000 units + 1,500 units (ending inventory) = 5,500 units
August: 6,000 units x 1.4 (40% ending inventory) = 8,400 units
September: 7,500 units x 1.4 = 10,500 units

Next, we can calculate the total units to be produced for each month:

July: 5,500 units - 1,500 units (beginning inventory) = 4,000 units
August: 8,400 units - 5,500 units = 2,900 units
September: 10,500 units - 8,400 units = 2,100 units

Then, we can calculate the manufacturing overhead for each month using the given formula:

July: $17,000 + ($6 x 4,000 units) = $41,000
August: $17,000 + ($6 x 2,900 units) = $35,400
September: $17,000 + ($6 x 2,100 units) = $29,600

Therefore, the budgeted manufacturing overhead for July is $46,400 (not $29,400 as option A suggests).

Larken Has Forecast Sales for the Next Three Months as Follows