Reference no: EM132706703
Question - MAR Engineering is a machine shop that uses skilled labour and Metal alloy to manufacture two types of aircraft replacement parts Regular & Heavy duty. After carefully examining relevant factors, the executive of MAR Engineering forecasts the following figures for 2018. Assume that work in process inventory is zero, units' costs of direct material purchased & finished goods sold is remain unchanged though out the budgeted year and variable production costs are variable with respect to direct manufacturing labour hours.
Direct Material
Material 111 alloy $7perKG
Material 112alloy $10perKg
Direct manufacturing labour $20perKg
Product
Content of each product unit Regular Heavy duty
Direct material 111alloy 12kgs 12kgs
Direct material 112 alloy 6kgs 8 kgs
Direct manufacturing labour 4hours 6hours
All direct manufacturing costs are variable with respect to the unit of out produced, additional information regarding the year 2018 is as follows:
Product Regular Heavy
Expected sales in units 5000 1000
Selling price per unit $600 $800
Target ending inventory in unit 1,100 50
Beg. Inventory in units 100 50
Beg. Inventory in dollars $38,400 $26,200
Direct Material 111 alloy 112alloy
Beg. Inventory in kg 7,000 6000
Target ending inventory in Kg 8000 2000
Budgeted Manufacturing Overhead Cost
Variable Cost $780,000
Fixed Cost $420,000
Total Manufacturing Cost $1,200,000
Other (Non- Manufacturing) Cost
Variable Cost $475,000
Fixed Cost $395,000
Total $870,000
Required - Prepare the budgeted income statement for MAR engineering.