Problem 23.1A Renfrow International manufactures and sells a single product. In

Question

Problem 23.1A

Renfrow International manufactures and sells a single product. In preparing its master budget for the current quarte, the company's controller has assembled the following information:

Renfrow International used the average cost method of pricing its inventory of finished goods.

Instructions

Compute the following budgeted quantities or dollar amounts:

A. Planned production of finished goods (in units)

B. Cost of finished goods manufactured

C. Ending finished goods inventory. (Remember that in using the average cost method you must first compute the avergae cost of units available for sale.)

D. Cost of goods sold.

Units Dollars Sales (budgeted) 150,000 $7,500,000 Finished goods inventory, beginning of quarter 38,000 975,000 Finished goods inventory, end of quarter 28,000 ?? Cost of finished goods manufactured (assume a budgeted manufacturing cost of $28 per unit) ?? ??

Explanation / Answer

A. Planned production of finished goods (in units)

= Budgeted sales + Finished goods inventory at the end of quarter - Finished goods inventory at the beginning of quarter

= 150000+28000-38000

= 140000 units.

B. Cost of finished goods manufactured.

= Number of finished goods manufactured * Budgeted manufacturing cost per unit

= 140000 * 28

= 3920000$

C. Ending finished goods inventory.

Average cost of units available for sale = 975000 + 140000 * 28

                                                               = 4895000$

Ending finished goods inventory = 4895000 / 178000 * 28000

                                                    = 770000$

D. Cost of goods sold

= Number of units sold * Average Cost per unit available for sale

= 150000 * 4895000 / 178000

= 4125000$

                                    =

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