Question

Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 20% of the next month's sales. It estimates that May's ending inventory will consist of 59,800 units. June and July sales are estimated to be 299,000 and 309,000 units, respectively. Trago assigns variable overhead at a rate of $3.70 per unit of production. Fixed overhead equals $419,000 per month. Compute the number of units to be produced and use this amount to compute the total budgeted overhead that would appear on the factory overhead budget for month of June.$1,525,300.$1,113,700.$1,542,700.$1,562,300.$1,532,700.

Answer 1

$1,532,700.

Step-by-step explanation:

We know that the total budgeted overhead equals to

= Variable overhead + fixed overhead

where,

Variable overhead = (June sales units + July sales units × given percentage - beginning inventory units) × variable overhead per unit

= (299,000 units + 309,000 × 20% - 59,800 units) × $3.70

= (299,000 units + 61,800 units - 59,800 units) × $3.70

= $1,113,700

And, the fixed overhead is $419,000

Now put these values to the above formula

So, the value would be equal to

= $1,113,700 + $419,000

= $1,532,700.

The July sales units × given percentage is ending inventory units