A company has the following annual budget data:
$\begin{array}{ll}
\text { Beginning finished goods inventory } & 40,000 \text { units } \
\text { Sales } & 70,000 \text { units } \
\text { Ending finished goods inventory } & 30,000 \text { units }\
\text { Direct materials } & \$ 10 \text { per unit } \
\text { Direct labor } & \$ 20 \text { per unit } \
\text { Variable factory overhead } & \$ 5 \text { per unit } \
\text { Selling costs } & \$ 2 \text { per unit } \
\text { Fixed factory overhead } & \$ 80,000
\end{array}$
What are total budgeted production costs for the year? (CIA adapted)

Question

A company has the following annual budget data:
$\begin{array}{ll}
\text { Beginning finished goods inventory } & 40,000 \text { units } \
\text { Sales } & 70,000 \text { units } \
\text { Ending finished goods inventory } & 30,000 \text { units }\
\text { Direct materials } & \$  10 \text { per unit } \
\text { Direct labor } & \$  20 \text { per unit } \
\text { Variable factory overhead } & \$  5 \text { per unit } \
\text { Selling costs } & \$  2 \text { per unit } \
\text { Fixed factory overhead } & \$ 80,000
\end{array}$
What are total budgeted production costs for the year? (CIA adapted)

Quizplus · Accepted Answer

To find the total budgeted production costs, calculate the units to be produced: $70,000 \text{ (sales)} + 30,000 \text{ (ending inventory)} - 40,000 \text{ (beginning inventory)} = 60,000 \text{ units}$. Then, calculate the cost per unit: $ \$10 \text{ (materials)} + \$20 \text{ (labor)} + \$5 \text{ (variable overhead)} = \$35 \text{ per unit}$. Multiply by the number of units: $60,000 \times \$35 = \$2,100,000$. Add fixed factory overhead: $ \$2,100,000 + \$80,000 = \$2,180,000$.

A Company Has the Following Annual Budget Data What Are Total Budgeted Production Costs for the Year? (CIA