Andrews Company manufactures a line of office chairs Each ch

Andrews Company manufactures a line of office chairs. Each chair takes $14 of direct materials and uses 1.9 direct labor hours at $16 per direct labor hour. The variable overhead rate is $1.20 per direct labor hour, and the fixed overhead rate is $1.60 per direct labor hour. Andrews expects to have 675 chairs in ending inventory. There is no beginning inventory of office chairs.

Calculate the unit product cost

Calculate the cost of budgeted ending inventory.

Solution

Calculation of Unit product Cost

Direct material $14.00

Direct labour (1.9 hour*$16) $30.40

Variable overhead (1.9*1.2) $2.28

Fixed Overhead (1.9*1.6) $3.04

Total Product cost per unit $49.72

Cost of budgeted ending inventory=675*49.72= $33,561