Question

Answer questions 4-10 using the information below:

Fullerton, Inc. makes and sells a single snowboard model, the Titan. Fullerton’s CEO expects to sell 3,910 snowboards at an estimated retail price of $1,320 per board during 2018. In the fall of 2017, Fullerton gathered the following data to prepare budgets for 2018:

Materials and Labor Requirements
Wood	17 board feet (b.f.) per snowboard
Fiberglass	15 yards per snowboard
Direct labor	7 hours per snowboard

​

CEO expects to sell 3,910 snowboards during 2018 at an estimated retail price of

$ 1,320 per board.​ Further, the CEO expects 2018 beginning inventory of 700 snowboards and would like to end 2018 with 900 snowboards in stock. The inventoriable unit cost for beginning finished goods inventory on January 1, 2018 ​is ​$230.00.

Data pertaining to the direct materials inventories are as follows:

	Beginning Inventory	Ending Inventory
Wood	2,100 b.f.	1,600 b.f.
Fiberglass	1,100 yards	2,100 yards

Variable manufacturing overhead is $20 per direct labor-hour. There are also $28,770 in fixed manufacturing overhead cots budgeted for 2018. Both variable and fixed overhead costs are allocated based on direct manufacturing labor-hours.

Other data include the following:

	2017 Unit Price	2018 Unit Price
Wood	$38.00 per b.f.	$40.00 per b.f.
Fiberglass	$14 per yard	$15 per yard
Direct labor	$34.00 per hour	$35.00 per hour

Assume Fullerton uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.

What is total cost of direct materials to be used?

Group of answer choices

$3,352,250

$4,135,300

$4,217,500

$3,714,250

Answer 1

Solution :

The Answer is (d)

Working :

Cost of Direct Material Used :

	Wood	Fiberglass
Total Units to be Produced (3,910 + 900 - 710)	4,110	4,110
Requirement per Unit	17 Board Feet	15 Yards
Total Requirement in Production	69,870 Board Feet	61,650 Yard
Opening Used	2,100 Board Feet	1,100 Yards
from Purchases	67,770 Board Feet	60,550 Yards
Cost of Material Used	(2,100 * 38) + (67,770 * 40) = $ 2,790,600	(1,100 * $ 14) + (60,550 * $ 15) = $ 923,650

Total Cost of Material Used = $ 2,790,600 + $ 923,650 = $ 3,714,250