Question

Preparing a Cost of Goods Sold Budget

Andrews Company manufactures a line of office chairs. Each chair takes $14 of direct materials and uses 1.9 direct labor hours at $14 per direct labor hour. The variable overhead rate is $1.20 per direct labor hour and the fixed overhead rate is $1.80 per direct labor hour. Andrews Company expects to produce 20,000 chairs next year and expects to have 730 chairs in ending inventory. There is no beginning inventory of chairs.

Direct Materials $

Direct Labor $

Variable Overhead $

Fixed Overhead $

Total Manufacturing Cost $

Less: Ending Inventory $

Cost of Goods Sold $

Answer 1

Direct Materials $ 14*20,000 = $ 28000

Direct Labor $ 14*1.9* 20,000 = $ 532,000

Variable Overhead $ 14*1.9*1.2*20,000 = $ 638400

Fixed Overhead $ 14*1.9*1.8*20,000 = $957600

Total Manufacturing Cost $ = 2156000

Less: Ending Inventory $ 107.8*730 = 78649

Cost of Goods Sold $2077306

Working:

Total Manufacturing Cost $ per unit = 2156000/ 20,000= 107.8 $

Ending Inventory $ 107.8*730 = 78649