Question

Presented is selected first quarter budget data for the Barney Company:

	Sales
January	25,000 units
February	20,000 units
March	42,000 units

Additional information:

Each unit of finished product requires two pounds of raw materials.

Barney maintains ending finished goods inventories equal to 25 percent of the following month's budgeted sales.

Barney maintains raw materials inventories equal to 20 percent of the following month's budgeted production.

January 1 inventories are in line with Barney's inventory policy.

Presented is additional information for the Barney Company

• Price per pound of raw materials $25
• Direct labor per unit of finished product 0.50 hours at $20 per hour
• Total monthly factory overhead $150,000 + $10 per direct labor hour

Barney's total manufacturing cost budget for January is:

Select one:

A. $1,575,000

B. $1,717,500

C. $1,693,750

D. $1,425,000

Answer 1

Calculation of total manufacturing cost budget for jan
particulars				jan	feb
inventory at beginning 25%(25000), 25%*20000				6250	5000
producton unit (b.f)				23750	25500
sales				25000	20000
inventory at the end				5000	10500
direct material = 23750*2*25 =1187500
Direct labour = 23750*0.5*20= 237500
overhead cost = 0.5*10*23750=118750
fixed factory overhead = 150000
total manufacturing cost = 1187500+237500+118750+150000= 1693750
therefore option "C" is correct