Question

Iguana, Incorporated, manufactures bamboo picture frames that sell for $20 each. Each frame requires 4 linear feet of bamboo, which costs $1.50 per foot. Each frame takes approximately 30 minutes to build, and the labor rate averages $13 per hour. Iguana has the following inventory policies: Ending finished goods inventory should be 40 percent of next month’s sales. Ending direct materials inventory should be 30 percent of next month’s production. Expected unit sales (frames) for the upcoming months follow

Answer 1

The question involves calculating the total variable cost of manufacturing a bamboo picture frame, with labor cost at $13 per hour and material cost at $1.50 per linear foot of bamboo, resulting in a total cost of $12.50 per frame.

Step-by-step explanation:

The student's question revolves around calculating the cost components and inventory requirements for a company manufacturing bamboo picture frames. Given the cost of materials and labor, along with the company's inventory policies, the student may be tasked with exercises in cost accounting or operational management. To compute the total cost per frame, we take into account both the labor and material costs. The cost of labor for one frame is $13 per hour and since it takes 0.5 hours to build a frame, it's $6.50 per frame for labor. The material costs are 4 linear feet at $1.50 per foot, totaling to $6.00 for the bamboo. Thus, the total variable cost to manufacture one frame is $6.50 + $6.00 = $12.50. These calculations are essential when preparing a budget or for managerial decision-making processes.