Question

During its first year of operations, Silverman Company paid $12,240 for direct materials and $10,700 for production workers' wages. Lease payments and utilities on the production facilities amounted to $9,700 while general, selling, and administrative expenses totaled $3,800. The company produced 6,800 units and sold 4,200 units at a price of $7.30 a unit. What is the amount of finished goods inventory on the balance sheet at year-end?

Answer 1

Answer:

$12,480

Explanation:

Given:

Amount paid for direct material = $12,240

production workers' wages = $10,700

Lease payments and utilities on the production facilities amounted = $9,700

general, selling, and administrative expenses = $3,800

Units produced = 6,800 units

Units sold = 4,200

Unit price of a unit = $7.30

Now,

Per unit Cost of production =$\frac{\textup{Total cost involved}}{\textup{Total number of units produced}}$

or

Per unit Cost of production =$\frac{\textup{12240+10700+9700}}{\textup{6800}}$

or

Per unit cost of production = $4.80

Also,

Units left in the inventory = Total units produced - Units sold

= 6,800 - 4,200

= 2,600

Thus,

Amount of finished goods inventory on the balance sheet at year-end

= units left in the inventory × Per unit cost of production

= 2,600 × $4.80

= $12,480