Answer:
The ABC Corporation
a) Total Expected Revenue (in dollars) for 20XX:
Revenue from T1 = 60,000 x $165 = $26,400,000
Revenue from T2 = 40,000 x $250 = $10,000,000
Total Revenue from T1 and T2 = $36,400,000
b) Production Level (in units) for T1 and T2
T1 T2
Total Units sold 160,000 40,000
Add Closing Inventory 25,000 9,000
Units Available for sale 185,000 49,000
less opening inventory 20,000 8,000
Production Level 165,000 units 41,000 units
c) Total Direct Material Purchases (in dollars):
Cost of direct materials used T1 T2
A: (165,000 x 4 x $12) $7,920,000 $2,460,000 (41,000 x 5 x $12)
B: (165,000 x 2 x $5) 1,650,000 615,000 (41,000 x 3 x $5)
C: 0 123,000 (41,000 x 1 x$3)
Total cost $9,570,000 $3,198,000 Total = $12,768,000
Cost of direct per unit = $58 ($9,570,000/165,000) for T1 and $78 ($3,198,000/41,000) for T2
Cost of direct materials used for production $12,768,000
Cost of closing direct materials:
A (36,000 x $12) $432,000
B (32,000 x $5) 160,000
C (7,000 x $3) 21,000 $613,000
Cost of direct materials available for prodn $13,381,000
Less cost of beginning direct materials:
A (32,000 x $12) $384,000
B (29,000 x $5) 145,000
C (6,000 x $3) 18,000 $547,000
Cost of direct materials purchases $12,834,000
d) The Total Direct Manufacturing Labor Cost (in dollars):
T1 T2
Direct labor per unit 2 hours 3 hours
Direct labor rate per hour $12 $16
Direct labor cost per unit $24 $48
Production level 165,000 units 41,000 units
Labor Cost ($) $3,960,000 $1,968,000
Total labor cost $5,928,000 ($3,960,000 + $1,968,000)
e) Total Overhead cost (in dollars):
Overhead rate = $20 per labor hour
Overhead cost per unit: T1 = $40 ($20 x 2) and T2 = $60 ($20 x 3)
T1 overhead = $20 x 2 x 165,000) = $6,600,000
T2 overhead = $20 x 3 x 41,000) = $2,460,000
Total Overhead cost = $9,060,000
Cost of goods produced:
Cost of opening inventory of materials = $547,000
Purchases of directials materials 12,834,000
less closing inventory of materials = $613,000
Cost of materials used for production 12,768,000
add Labor cost 5,928,000
add Overhead cost 9,060,000
Total production cost $27,756,000
f) Total cost of goods sold (in dollars):
Cost of opening inventory = $3,928,000
Total Production cost = $27,756,000
Cost of goods available for sale $31,684,000
Less cost of closing inventory $4,724,000
Total cost of goods sold $26,960,000
g) Total expected operating income (in dollars)
Sales Revenue: T1 and T2 $36,400,000
Cost of goods sold 26,960,000
Gross profit $9,440,000
less marketing & distribution 400,000
Total Expected Operating Income = $9,040,000
Explanation:
a) Cost of beginning inventory of finished goods:
T1, (Direct materials + Labor + Overhead) X inventory units =
T1 = 20,000 x ($58 + 24 + 40) = $2,440,000
T2 = 8,000 ($78 + 48 + 60) = $1,488,000
Total cost of beginning inventory = $3,928,000
b) Cost of closing Inventory of finished goods:
T1 = 25,000 x ($58 + 24 + 40) = $3,050,000
T2 = 9,000 ($78 + 48 + 60) = $1,674,000
Total cost of closing inventory = $4,724,000