Question

Mercury Bag Company produces cases of grocery bags. The managers at Mercury are trying to develop budgets for the upcoming quarter. The following data have been gathered: Projected sales in units 1,410 cases Selling price per case $ 240 Inventory at the beginning of the quarter 150 cases Target inventory at the end of the quarter 100 cases Direct labor hours needed to produce one case 2 hours Direct labor wages $ 10 per hour Direct materials cost per case $ 8 Variable manufacturing overhead cost per case $ 6 Fixed overhead costs for the upcoming quarter $ 220,000a. Using the above information, develop Mercury's sales forecast in dollars and production schedule in units. b. What is Mercury's budgeted variable manufacturing cost per case?c. Prepare Mercury's manufacturing cost budget.

Answer 1

Answer: (a) Sales forecast $338,400, Production schedule $1,360 (b) Budgeted variable manufacturing cost per case $14, (c ) Total Manufacturing Cost $239,760

Explanation:

Sales forecast

$

Budgeted sales. 1,410

×Selling price per case 240

----------------

Budgeted sales. 338,400

Production schedule

$

Budgeted sales. 1,410

Targeted ending inventory 100

----------------

Cases budgeted to be available

For sale. 1,510

Less: Beginning inventory. 150

---------------

Planned production in unit 1,360

----------------

Manufacturing Cost budget

$

Direct materials ($8 × 1,410) 11,280

Direct Labour( $10 × 2) 20

Variable manufacturing overhead ($6 × 1,410) 8,460

----------------

Total variable manufacturing cost 19,760

Add: Fixed manufacturing overhead. 220,000

------------------

Total manufacturing cost. 239,760

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Variable manufacturing cost per case

= Total variable manufacturing cost / projected sales in units

= 19,760/ 1,410

= $14

Workings

Cases budgeted to be available for sales = Budgeted sales + Target ending inventory

= 1,410 + 100

= 1,510

Answer 2

Answer: a. Sales Forecast = $338400 , b, Variable cost per case = $34, c. Budgeted Manufacturing costs = $266240

Explanation:

a. Sales forecast

Projected Sales units = 1410

Selling Price = $240

Sales Forecast = Projected sales units x Selling price

Sales Forecast = 1410 x $240 = $338400

b. Budgeted Variable cost Per unit

Budgeted Variable cost Per Unit = direct labor cost per unit + Direct Material cost per unit + Variable Manufacturing costs per unit

Direct Labor hour needed to produce one case = 2 hours

Direct labor Wage per hour = $10

Direct labor wage per unit or case = 2 x $10 =$20

Direct Materials per case = $8

Variable Fixed Manufacturing costs per unit = $6

Variable Costs Per Unit = $20 + $8 + $6 = $34

c. Budgeted Manufacturing Costs

Budgeted Manufacturing costs = Total Fixed costs + Total Variable costs

Total Fixed Costs = $220 000

Total Variable cost costs

we have a variable cost per unit of $34 per case to find total variable units we need to multiply variable costs per unit by number of units produced in the current period

number of cases at the beginning = 150 cases

Targeted sales units = 1410 cases

Targeted units on hand at the end = 100 cases

Budgeted cases to be produced in the upcoming period = 1410 + 100 - 150

Budgeted cases to be produced in the upcoming period = 1360 cases

Total Variable costs = 1360 x $34 = $46240

Total Manufacturing costs = $220 000 + $ 46240 = $266240