Question

Waltzing Along Corp. is a manufacturer that makes one product. It provided the following information to help prepare the master budget for the next four months of

operations:
- The budgeted selling price per unit is $56. Budgeted unit sales for June, July, August, and September are 46,000; 43,800; 42,000; and 45,000 units, respectively.
- All sales are on credit. The ending finished goods inventory equals 20% of the following month's sales.
- The ending raw materials inventory equals 15% of the following month's raw materials production needs. Each unit of finished goods requires 6 ounces of raw materials. The raw materials cost $1.50 per ounce.
- The direct labor wage rate is $10.00 per hour. Each unit of finished goods requires 2.2 direct labor-hours.
- Variable manufacturing overhead is $5.00 per direct labor-hour. Fixed manufacturing overhead is zero.
The estimated finished goods inventory balance at the end of July is closest to:
A. $352,800
B. $367,920
C. $390,960
D. $264,600
E. $378,000

Answer 1

The estimated finished goods inventory balance at the end of July for Waltzing Along Corp. is $352,800. This was calculated by finding 20% of August sales for ending inventory and multiplying by the total cost per unit, which includes raw materials, labor, and overhead.

Step-by-step explanation:

To determine the estimated finished goods inventory balance at the end of July for Waltzing Along Corp., we need to calculate the budgeted units required for August and then apply the cost per finished unit. First, we calculate 20% of August sales to get the ending inventory for July, which is 20% of 42,000 units = 8,400 units.

Next, the cost per unit includes the cost of raw materials and direct labor. The cost for raw materials is 6 ounces per unit × $1.50 per ounce = $9 per unit, and the direct labor cost is 2.2 hours per unit × $10.00 per hour = $22 per unit. Variable manufacturing overhead is $5.00 per direct labor-hour × 2.2 hours = $11. Therefore, the total cost per unit is $9 (raw materials) + $22 (labor) + $11 (overhead) = $42 per unit.

The finished goods inventory cost at the end of July is then 8,400 units × $42 = $352,800.

A master budget is a financial document that includes how much an organization plans to make and how much it plans to spend over a fiscal year. This document typically reports financial information in quarters or months.