4. Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.How many bears must be produced in February?A) 600B) 540C) 624D) 744E) None of the choices are correct

Question

4.   Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.How many bears must be produced in February?A) 600B) 540C) 624D) 744E) None of the choices are correct

Penny Manash · Accepted Answer

Final Answer : C, Explanation :  To determine the number of bears that must be produced in February, we need to calculate the ending inventory of bears for January first.January sales = 50020% of February sales = 120Total bears needed for February = January ending inventory + February sales - February ending inventoryTotal bears needed for February = 80 + 600 - 120 = 560To produce 560 bears, we need to calculate the materials required:Fabric needed = 560 bears x 0.8 yards = 448 yardsStuffing needed = 560 bears x 2 pounds = 1120 poundsTo determine the amount of raw materials needed to be purchased, we need to calculate the ending inventory for January:Fabric ending inventory = 80 yards x 0.9 = 72 yardsStuffing ending inventory = 100 pounds x 0.75 = 75 poundsTherefore, the amount of raw materials required to be purchased for February is:Fabric required = 448 yards - 72 yards = 376 yardsStuffing required = 1120 pounds - 75 pounds = 1045 poundsTo determine the cost of producing 560 bears, we can calculate the manufacturing cost per bear first:Direct labor per bear = $18 per hour x 0.67 hours per bear = $12.06 per bearVariable overhead per bear = $21 per direct labor hour x 0.67 hours per bear = $14.07 per bearTotal variable cost per bear = $15.96 per bearTotal fixed overhead cost per month = $25,000 per monthTotal fixed overhead cost per bear = $25,000 per month ÷ 2000 bears per month = $12.50 per bearTotal manufacturing cost per bear = $15.96 per bear + $12.50 per bear = $28.46 per bearTherefore, the total cost of producing 560 bears is:Total cost = 560 bears x $28.46 per bear = $15,925.60Answer: C, 624 bears, is the best choice.

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