Darke Corporation makes one product and has provided the following information: a.Budgeted unit sales for October, November, and December are 7,600, 9,000, and 10,100 units respectively.
B.The ending finished goods inventory equals 40% of the following month's sales.
C.Each unit of finished goods requires 5 pounds of raw materials.The raw materials cost $1.00 per pound.
D.The direct labor wage rate is $19.00 per hour.Each unit of finished goods requires 3.0 direct labor-hours.
E.Manufacturing overhead is entirely variable and is $11.00 per direct labor-hour.
The estimated finished goods inventory balance at the end of November is closest to:

A) $294,920
B) $383,800
C) $133,320
D) $250,480

Question

Sofia Afanasev · Accepted Answer

Final Answer : B, Explanation :  First, we need to calculate the production needed to meet the sales for each month:October: 7,600 unitsNovember: 9,000 units + 40% of December sales = 9,000 + 0.4(10,100) = 9,000 + 4,040 = 13,040 unitsDecember: 10,100 units + 40% of January sales = 10,100 + 0.4(x), where x is the sales for January.We can use the information given to calculate the amount of raw materials and direct labor needed for each month:October:Raw materials: 7,600 units x 5 pounds per unit = 38,000 poundsDirect labor: 7,600 units x 3.0 hours per unit = 22,800 hoursNovember:Raw materials: 13,040 units x 5 pounds per unit = 65,200 poundsDirect labor: 13,040 units x 3.0 hours per unit = 39,120 hoursNext, we can calculate the total cost of manufacturing for each month:October:Raw materials: 38,000 pounds x $1.00 per pound = $38,000Direct labor: 22,800 hours x $19.00 per hour = $433,200Manufacturing overhead: 22,800 hours x $11.00 per hour = $250,800Total cost: $38,000 + $433,200 + $250,800 = $722,000November:Raw materials: 65,200 pounds x $1.00 per pound = $65,200Direct labor: 39,120 hours x $19.00 per hour = $743,280Manufacturing overhead: 39,120 hours x $11.00 per hour = $430,320Total cost: $65,200 + $743,280 + $430,320 = $1,238,800Finally, we can use the information given to calculate the estimated finished goods inventory balance at the end of November:Ending finished goods inventory for October: 40% of November sales = 0.4(9,000) = 3,600 unitsEnding finished goods inventory for November: 40% of December sales = 0.4(x), where x is the sales for December.We don't know x, but we do know that the ending finished goods inventory for December will be 40% of January sales.Therefore, we can assume that the ending finished goods inventory for November will be the same as the ending finished goods inventory for December.To calculate the cost of the ending finished goods inventory for November, we need to consider the cost per unit and the number of units:Cost per unit: Total cost for November / Total number of units produced in November = $1,238,800 / 13,040 units = $95.10 per unitNumber of units in ending finished goods inventory for November: 3,600 unitsCost of ending finished goods inventory for November: $95.10 per unit x 3,600 units = $342,360Therefore, the estimated finished goods inventory balance at the end of November is $342,360, which is closest to answer choice B, $383,800. The estimated unit product cost is computed as follows:   The estimated finished goods inventory balance at the end of November is computed as follows:   *December sales of 10,100 units × 40% = 4,040 units

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