Question

Question: How do i find the ending available inventory of lamp kits in part 7 ( i have starred it 9.13).

I just want the formula broken down on how to obtain that answer. Based on the following data:

Division N has decided to develop its budget based upon projected sales of 37,000 lamps at
$54.00 per lamp.
The company has requested that you prepare a master budget for the year. This budget is to be used
for planning and control of operations and should be composed of:
1. Production Budget
2. Materials Budget
3. Direct Labor Budget
4. Factory Overhead Budget
5. Selling and Administrative Budget
6. Cost of Goods Sold Budget
7. Budgeted Income Statement
8. Cash Budget
Notes for Budgeting:
The company wants to maintain the same number of units in the beginning and ending inventories of
work-in-process, and electrical parts while increasing the inventory of Lamp Kits to 750 pieces and
decreasing the finished goods by 20%.
Complete the following budgets
1	Production Budget
	Planned Sales
	Desired Ending Inventory of Finished Goods
	Total Needed
	Less: Beginning Inventory
	Total Production			36,400 units

2	Materials Budget
	Lamp Kits
	Needed for Production				36,400 units	{8.01}
	Desired Ending Inventory				750 units	{8.02}
	Total Needed				37,150 units	{8.03}
	Less: Beginning Inventory				500 units	{8.04}
	Total Purchases				36,650 units
	Cost per piece				$16.72	{8.05}
	Cost of Purchases (Round to two places, $##.##)				$612,788.00	{8.06}
3	Direct Labor Budget
	Labor Cost Per Lamp				$2.13	{8.07}
	Production
	Total Labor Cost (Round to two places, $##.##)				$77,532.00	{8.08}
4	Factory Overhead Budget
	Variable Factory Overhead:
	Variable Factory Overhead Cost Per Unit				$2.0600000
	Number of Units to be Produced
	Total Variable Factory Overhead (Round to two places, $##.##)				$74,984.00	{8.09}
	Fixed Factory Overhead				$275,000.00	{8.10}
	Total Factory Overhead (Round to two places, $##.##)				$349,984.00	{8.11}

4	Factory Overhead Budget
	Overhead Allocation rate based on:
	1. Number of Units						36400
		Total Factory Overhead / Number of Units					349984
		(Round to two places, $##.##)					$9.61	{9.01}
5	Cost of making one unit next year
		Cost of one Lamp Kit					16.72
		Labor Cost Per Lamp					$2.13	{9.02}
		Factory overhead per unit
		Total cost of one unit					$28.46	{9.03}
		(Round to two places, $##.##)
6	Selling and Admin. Budget
	Fixed Selling						41000
	Variable Selling (Round to two places, $##.##)						$117,660.00	{9.04}
	Fixed Administrative						56000
	Variable Administrative (Round to two places, $##.##)						$75,480.00	{9.05}
	Total Selling and Administrative   (Round to two places, $##.##)						$290,140.00	{9.06}
7	Cost of Goods Sold Budget - Assume FIFO (First-In, First-Out) and overhead is applied based on the number of units to be produced.						Round dollars to two places, $##.##
	Beginning Inventory, Finished Goods						$90,000.00	{9.07}
	Production Costs:						$1,035,944.000
	Materials:
	Lamp Kits:
	Beginning Inventory						$8,000.000
	Purchased						$612,788.000
	Available for Use						$620,788.000
	Ending Inventory of Lamp Kits						$12,540.00	{9.08}
	Lamp Kits Used In Production						$608,248.000
	Total Materials:						$608,248.00	{9.09}
	Labor						$77,532.00	{9.10}
	Overhead						$349,984.00	{9.11}
	Cost of Goods Available						$1,125,764.00	{9.12}
	*****  Less: Ending Inventory, Finished Goods						$68,304.00	{9.13}
	Cost of Goods Sold						$1,057,460.00	{9.14}

Answer 1

This is good tricky question.

It is given in the question that the sales is 37,000 units and the production unites are 36,400 - It means that the out of the total 37,000 units sales, 600 units will be taken from the opening stock. Now, to calculate production units we use following formula -

Total sales units + Closing stock - Opening stock = Production..

in this equation - total sales units are 37000 and production is 36400 which means that this term - (Closing stock - Opening stock) has be to be (600) then only the equation will be satisfied. see below=

37000 - 600 = 36400.

hence, the difference bw opening and closing stock has to be 600. Further, it is given in the question that closing stock will be decreased by 20% on opening stock - which means the difference bw closing and opening stock in percentage is 20%. - now it can be concluded that this 600 is equal to 20% of opening stock. - thus the 100% opening stock is -

20% is equal to 600 units

hence 1% is equal to = 600/20%

hence, 100% is equal to = 600/20%*100% = 3000 units.

Therefore the closing stock will be 3000-600 = 2400 unints.

Now, the cost of production one unit given is 28.46. we can calculate the cost of 2400 units as 2400x28.46 = 68,304.

hope this is clear to you. good tricky question. thanks. ask if there is any doubt.