Preparing an Ending Finished Goods Inventory Budget Andrews Company manufactures a line of office chairs. Each chair takes $14 of direct materials and uses 1.9 direct labor hours at $12 per direct labor hour. The variable overhead rate is $1.10 per direct labor hour, and the fixed overhead rate is $1.60 per direct labor hour. Andrews expects to have 630 chairs in ending inventory. There is no beginning inventory of office chairs. Required: 1. Calculate the unit product cost. Round your answer to the nearest cent. $ 2. Calculate the cost of budgeted ending inventory. Round your answer to the nearest dollar. $

Consider the following calculations

Explanation:

1. Direct material $14

Direct labor (16*1.9) 3.04

Variable overhead (1.1*1.9) 2.09

Fixed overhead (1.5*1.9) 2.85

Unit product cost $21.98

2. Cost of budgeted ending inventory = 21.98*620 = $13, 628

1 - Unit product cost = $41.93

2 - Cost of budgeted ending inventory = $26416

Explanation:

Before calculating unit product cost, lets first understand what product cost is and what elements form part of it.

So the product costs are the costs incurred to produce/manufacture a product and the unit product cost is the total production cost per unit. These costs encompass prime costs (all of the direct costs, direct material, labor and expenses if any?) and conversion costs (labor cost and manufacturing overhead).

Now lets begin with adding all the per unit costs to come to unit product cost.

UPC = direct material + labor + variable overhead + fixed overhead

UPC = $14 + $22.8 (12$*1.9) + $2.09 ($1.1*1.9) + $3.04 ($1.6*1.9)

Unit product cost = $41.93

Now since we have calculated the unit product cost we can simply multiply it with the budgeted number of chairs to come to the cost of budgeted ending inventory.

Ending inventory=630

Cost of budgeted ending inventory = 630*$41.93

Cost of budgeted ending inventory = $26415.9

CBI = $26416 - after round off.