Solving For Budgeted Manufacturing Costs Calvin Company Exp

Solving For Budgeted Manufacturing Costs Calvin Company Expects To Se

Calvin Company expects to sell 10 million cases of paper towels during the current year. Budgeted costs per case are $24 for direct materials, $18 for direct labor, and $6 (all variable) for manufacturing overhead. Calvin began the period with 80,000 cases of finished goods on hand and wants to end the period with 20,000 cases of finished goods on hand. There is no beginning or ending inventory of work-in-process.

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The task requires calculating the total budgeted manufacturing costs for Calvin Company for the current year, considering the expected sales, inventory levels, and per-unit costs. The steps include determining the number of units to produce, calculating the manufacturing cost per unit, and then computing the total costs involved in manufacturing the goods.

First, determine the number of units that need to be produced during the period. Since Calvin wants to have 20,000 units in ending inventory and starts with 80,000 units in beginning inventory, the total number of units to be manufactured can be computed as follows:

Units to produce = (Expected sales + Ending inventory) - Beginning inventory

Units to produce = (10,000,000 + 20,000) - 80,000 = 9,940,000 units.

Next, calculate the manufacturing cost per unit. The costs are given as:

  • Direct materials: $24 per case
  • Direct labor: $18 per case
  • Manufacturing overhead: $6 per case

Since all these costs are variable and per unit, the total cost per unit is the sum of these costs:

Total cost per unit = $24 + $18 + $6 = $48

Then, compute the total manufacturing costs by multiplying the total units to be produced by the cost per unit:

Total manufacturing costs = 9,940,000 units × $48 = $477,120,000

This figure represents the budgeted manufacturing costs for Calvin Company during the current period, covering all direct materials, direct labor, and manufacturing overhead (which are all variable costs). It provides comprehensive insight into the expected total expenditure for production based on the company's projected sales and inventory policies.

In conclusion, Calvin Company's budgeted manufacturing costs for the current year are estimated at approximately $477.12 million, aligning with its sales forecast and inventory management strategies. This figure assists in overall financial planning and cost control measures essential for effective operational management.

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