A Company Is Preparing Its' Budgets for the Upcoming Year

A company is preparing its' budgets for the upcoming year. Current direct materials cost is $150,000 and current direct manufacturing labour is $1,000,000, both of which are expected to increase by 4% next year. Overhead costs for the year just ending are: variable $18,000, and fixed $30,000. The firm expects to achieve a 2% cost reduction in overhead costs by continuous improvement. What is the company's expected cost for the upcoming year, if production is the same number of units as the current year?

A) $1,175,000
B) $1,176,920
C) $1,196,920
D) $1,243,040
E) $1,263,040

Correct Answer:

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