Question

Answer the following questions using the information below:

Meridian Industries manufactures and sells two models of watches Prime and Luxuria. It expects to sell 3,000 units of Prime and 1,000 units of Luxuria in 2016.The following estimates are given for 2016:

Prime Luxuria
Selling price $200 $500
Direct materials 20 50
Direct labor 40 150
Manufacturing overhead 40 100

Meridian had an inventory of 200 units of Prime and 75 units of Luxuria at the end of 2015. It has decided that as a measure to counter stock outages it will maintain ending inventory of 350 units of Prime and 200 units of Luxuria.

Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $10. There were 100 units of Crimpson in stock at the end of 2015.The management does not want to have any stock of Crimpson at the end of 2016.

*42) What is the total budgeted cost of goods manufactured in 2016?*
A) $600,000
B) $625,500
C) $652,500
D) $667,500

Answer 1

To calculate the total budgeted cost of goods manufactured in 2016 for both Prime and Luxuria watches, we take into account production requirements, direct costs, and manufacturing overhead, which results in a total of $652,500.

Step-by-step explanation:

To calculate the total budgeted cost of goods manufactured in 2016 for Meridian Industries, we must consider the costs of production for both the Prime and Luxuria models of watches. Using the provided information, first we find the production requirements by adding the desired ending inventory to the units expected to be sold and then subtracting the beginning inventory.

• Prime: (3,000 + 350) - 200 = 3,150 units
• Luxuria: (1,000 + 200) - 75 = 1,125 units

Next, we determine the total direct costs and manufacturing overhead for each model and then sum these to find the total cost of goods manufactured.

• Prime: (3,150 units) x ($20 direct materials + $40 direct labor + $40 overhead) = $3,150 x $100 = $315,000
• Luxuria: (1,125 units) x ($50 direct materials + $150 direct labor + $100 overhead) = $1,125 x $300 = $337,500

The sum of these amounts is the total budgeted cost of goods manufactured for 2016.

Total Cost of Goods Manufactured = $315,000 (Prime) + $337,500 (Luxuria) = $652,500

Therefore, the correct answer is C) $652,500.