Question

Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 10% of the next month's sales. It estimates that May's ending inventory will consist of 28,800 units. June and July sales are estimated to be 288,000 and 298,000 units, respectively. Trago assigns variable overhead at a rate of $2.60 per unit of production. Fixed overhead equals $408,000 per month. Compute the number of units to be produced and use this amount to compute the total budgeted overhead that would appear on the factory overhead budget for the month of June.

Answer 1

The number of units to be produced in June is 0 units. The total budgeted overhead for June is $0.

Step-by-step explanation:

In order to determine the number of units to be produced, we need to calculate the ending inventory for each month. Since the ending inventory for May is given as 28,800 units, we can calculate the June ending inventory as 10% of June sales, which is 288,000 units. So, the number of units to be produced in June is the difference between June sales and June ending inventory, which is 288,000 - 288,000 = 0 units.

To calculate the total budgeted overhead for June, we need to multiply the number of units to be produced (0 units) by the variable overhead rate of $2.60 per unit. Therefore, the total budgeted overhead for June would be 0 units * $2.60 per unit = $0.

Answer 2

Opening Stock of June = 28,800 units

Sales for June = 288,000 units

Closing Stock of June = July Sales x 10% = 298000 x 10% = 29,800 units