In completing the Ending Finished Goods Inventory Budget,the managers of Jimbob Co.have determined that there should be 5,000 units of finished goods inventory on hand at the end of the budgeted period.In preparing other budgets they have used the following estimates of quantities and costs required to complete one unit: Manufacturing overhead is allocated at the rate of $5.00 per direct labour hour.Using the above data,the ending finished goods inventory should be:

Question

In completing the Ending Finished Goods Inventory Budget,the managers of Jimbob Co.have determined that there should be 5,000 units of finished goods inventory on hand at the end of the budgeted period.In preparing other budgets they have used the following estimates of quantities and costs required to complete one unit:  Manufacturing overhead is allocated at the rate of $5.00 per direct labour hour.Using the above data,the ending finished goods inventory should be:

Quizplus · Accepted Answer

To calculate the cost of ending finished goods inventory, we need to first calculate the total cost per unit:

Direct materials: $20
Direct labor: 3 hours x $12 per hour = $36
Manufacturing overhead: 3 hours x $5 per hour = $15
Total cost per unit: $71

To calculate the cost of ending finished goods inventory, we can multiply the total cost per unit by the desired quantity of 5,000 units:

$71 x 5,000 = $355,000

However, this represents the total cost of producing 5,000 units, not just the ending finished goods inventory. To calculate the cost of just the ending finished goods inventory, we need to subtract the cost of goods sold (COGS) from the total cost:

COGS = (10,000 units produced - 5,000 units ending inventory) x $71 = $355,000
Ending finished goods inventory = Total cost - COGS = $355,000 - $242,500 = $112,500

Therefore, the correct answer is B) $112,500.

In Completing the Ending Finished Goods Inventory Budget,the Managers of Jimbob