Odana plans to sell 90,000 units of its only product at a price of $16 each.
Assume that there will be 7,500 units of the product in inventory at January 1, 2015.
During 2015, the inventory quantity is to be increased 15% (so the ending inventory is 15% higher than the beginning inventory).
- Two types of materials are used to make the product.
- Material A:
- Each product requires 3 ounces of Material A.
- Material A costs $.40 (40 cents) per ounce.
- Assume that on January 1, 2015, there will be 10,000 ounces of Material A in the Raw Materials Inventory.
- During 2015, the inventory quantity of Material A will be increased 10% (so the ending inventory is 10% higher than the beginning inventory).
- Material B:
- Each product requires 2 ounces of Material B.
- Material B costs $.36 (36 cents) per ounce.
- Assume that on January 1, 2015, there will be 5,000 ounces of Material B in the Raw Materials Inventory.
- During 2015, the inventory quantity of Material B will be increased 10% (so the ending inventory is 10% higher than the beginning inventory).
- Each unit of product can be produced in 20 minutes of direct labor time.
- Direct labor is paid at the rate of $12.00 per hour.
- The variable manufacturing overhead is applied at the rate of $2.60 per direct labor hour.
- The fixed manufacturing overhead for the year is estimated at $175,000.
Required:
- How many units of product must be produced in 2015?
- How many ounces of Material A must be purchased during 2015? What is the cost of the planned purchases?
- How many ounces of Material B must be purchased during 2015? What is the cost of the planned purchases?
- How many direct labor hours must be planned for 2015 to support production? What is the cost of the planned direct labor?
- What is the planned manufacturing overhead cost for the year?