Trago Company manufactures a single product and has a IT policy that ending inve

Question

Trago Company manufactures a single product and has a IT policy that ending inventory must equal 5% of the next month's sales. It estimates that May's ending inventory will consist of 14,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Trago assigns variable overhead at a rate of $1.80 per unit of production. Fixed overhead equals $400,000 per month. Compute the number of units to be produced and use this amount to compute the total budgeted overhead that would appear on the factory overhead budget for month of June. O $878,800 O $922,000. O $930,100. $904.900. O $920,200

Explanation / Answer

Number of units to be produced in June = June sales in units + June ending inventory (5% of july sales in units) - June Beginning inventory

= 280,000 + (290,000*5%) - 14,000

= 280,500

Variable overhead = 280,500 units * 1.8 per unit

= 504,900

Fixed overhead = 400,000

Total budgeted overhead = Variable overhead + Fixed overhead

= 504,900 + 400,000

= 904,900

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