Pavane, Inc

Subject:AccountingPrice: Bought3

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Pavane, Inc., uses absorption costing. Pavane manufactures and sells a single product, the DG18. At the end of 2020, Pavane’s management accountant gathered the following data to prepare budgets for 2021:

Materials and labor requirements
Direct materials
W	6 board feet (b.f.) per unit
F	7 yards per unit
Direct manufacturing labor	5 hours per unit

 

Pavane expects to sell 2.000 products during 2021 at an estimated retail price of $ 550 per unit. Further, it expects 2021 beginning inventory to be 200 units and would like to end 2021 with 250 products in stock.

Direct materials inventories
	Beginning inventory 1/1/2021	Ending inventory 31/12/2021
W	3.200 b.f.	2.500 b.f.
F	1.800 yards	2.800 yards

 

Variable manufacturing overhead is $ 9 per direct manufacturing labor-hour. There are also $ 65.600 in fixed manufacturing overhead costs budgeted for 2021. Pavane combines both variable and fixed manufacturing overhead into a single rate based on budgeted direct manufacturing labor-hours. Marketing costs are incurred at the rate of $ 300 per sales visit. The marketing plan calls for 35 sales visits during 2021. Finally, there are $ 36.000 in other non-manufacturing costs budgeted for 2021.

Other data includes:

	2020 unit price	2021 unit price
W	$29,00 per b.f.	$32,00 per b.f.
F	$5,80 per yard	$6,00 per yard
Direct manufacturing labor	$25,00 per hour	$26,00 per hour

 

The value of the finished goods inventory on December 31, 2020, is $ 83.200. Pavane uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.

Considering the budgets for 2021 answer the following questions.

Required:

A3: Determine the budgeted total cost of materials used ($).

A4: Determine the budgeted Cost of Goods Manufactured ($).