The Magnolia Company has budgeted for sales of 150 000 units of its product for the year. Expected unit costs, based on past experience, should be $18 for direct materials, $15 for direct labour and $20 for manufacturing overhead. Assume no beginning and ending work in process inventories. The Magnolia Company begins the year with 30 000 finished units on hand and budgets the ending finished goods inventory at 20 000 units. Compute the budgeted production in units and dollars.

Question

Quizplus · Accepted Answer

The budgeted production in units is calculated as the budgeted sales plus the ending finished goods inventory minus the beginning finished goods inventory: 150,000 + 20,000 - 30,000 = 140,000 units. The total unit cost is the sum of direct materials, direct labor, and manufacturing overhead costs: $18 + $15 + $20 = $53. Therefore, the budgeted production in dollars is 140,000 units * $53 = $7,420,000.

The Magnolia Company Has Budgeted for Sales of 150 000