Question

Meyer, Inc makes one product and has provided the following information about its finished goods:

• Each unit requires 1.5 pounds of raw materials which cost $5.00 per pound.
• Each unit requires 2 direct labor hours at a rate of $12.00 per hour.
• Manufacturing overhead is $11.00 per direct labor-hour.

If Meyer has 20,000 units in its ending finished goods inventory, the amount Meyer will report in its budgeted balance sheet for finished goods is:

	a.	$   560,000
	b.	$   870,000
	c.	$1,070,000
	d.	$   406,600

Answer 1

Correct answer-------(c) $1,070,000

Working

Direct material (20000 units x 1.5 x $5)	$            150,000
Direct labor (20000 units x 2 x $ 12)	$            480,000
Manufacturing Overhead (20000 units x 2 x $ 11)	$            440,000
Total ending inventory (150000+480000+440000)	$        1,070,000

Ending inventory is calculated on all 20000 units