Question

12. If we assume that there is no fixed manufacturing overhead and the variable manufacturing overhead is $12 per direct labor-hour, what is the estimated finished goods inventory balance at the end of July

Answer 1

Answer: $403,200

Explanation:

It is shown in the question that the ending finished goods for July should be 25% of the sales in August.

Inventory therefore is;

= 28,000 * 25%

= 7,000 units

Cost per unit consists of;

4 pounds of Raw material at $2.40 per pound

2 direct labor hours at $12 per hour

Variable manufacturing overhead at $12 per direct labor hour

= ( 4 * 2.4) + ( 2 * 12) + ( 2 * 12)

= $57.60

Inventory Value = 7,000 * 57.60 = $403,200