Selected account balances for the year ended December 31 are provided below for B-Fun Company: Selling and administrative salaries . . . . . . . . . . . . . . . . . .$110,000
Purchases of raw materials . . . . . . . . . . . . . . . . . . . . . . . .$290,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $80,000
Manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . .$270,000
Sales Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000

Inventory balances at the beginning and end of the year were as follows:
Beginning of the Year End of the Year

Raw materials . . . . . . . . . . . . . . . . . . . . . $40,000 $10,000
Work in process . . . . . . . . . . . . . . . . . . . ? $35,000
Finished goods . . . . . . . . . . . . . . . . . . . . $50,000 ?

The total manufacturing costs for the year were $683,000; the goods available for sale totaled $740,000; and the cost of goods sold totaled $660,000. Assume that in the following year the company expects to produce 50,000 units and manufacturing overhead is fixed. What average cost per unit and total cost would you expect to be incurred for direct materials?

Question Completion:

Assume that the dollar amounts given above are for the equivalent of 40,000 units produced/sold during the year.

B-Fun Company

a. The average cost per unit for direct materials = $8.00

b. The total cost to be incurred for direct materials = $400,000

Explanation:

a) Data and Calculations:

Selling and administrative salaries = $110,000

Purchase of raw materials =  $290,000

Direct labor = ?

Advertising expense = $80,000

Manufacturing overhead = $270,000

Sales Commissions = $50,000

Inventory balances:

Raw materials    $40,000     $10,000

Work in process        ?         $35,000

Finished goods $50,000        ?

Total manufacturing costs = $683,000

Goods available for sale = $740,000

Cost of goods sold = $660,000

1. Ending inventory of finished goods:

Beginning inventory        $50,000

Cost of manufacturing    683,000

Cost of goods sold        (660,000)

Ending inventory             $73,000

2. Cost of raw materials:

Beginning inventory =   $40,000

Purchases                      290,000

less Ending inventory     (10,000)

Cost of raw materials $320,000

3. Direct labor:

Cost of manufacturing =  $683,000

cost of raw materials        (320,000)

manufacturing overhead (270,000)

Direct labor                        $93,000

4. Beginning work in process:

Ending work in process =    $35,000

Cost of manufacturing         683,000

Less: Direct labor                  (93,000)

         Manuf. overhead      (270,000)

         Direct materials        (320,000)

Beginning work in process $35,000

                                         Current    Following

                                           Year          Year

Raw materials:

Average cost per unit       $8.00          $8.00

Units of materials              40,000       50,000

Total cost                      $320,000   $400,000

Average cost per unit = Total materials cost/Units of materials

= $320,000/40,000 = $8

Total manufacturing cost for the following year = $8 x 50,000 units

= $400,000

answer; depth;

answer/// there is an inverse relationship between price and quantity demanded;