Answer:
Explanation:
a.
Direct Material cost per unit = Cost of Direct materials/ units produced = $3400/17000 mugs = $0.20 per mug
Direct material used per mug = 0.40 pounds
Direct material cost per pound = $0.20 / 0.40 = $0.50 per round
Direct material inventory = 3400 * $0.50 = $1700
b. Compute the finished goods ending inventory in units on December 31, year 1.
Finished Goods inventory (in units) = Finished goods inventory / manufacturing cost per unit
Manufacturing cost per unit = (Direct material + Direct Labour + Indirect manufacturing cost)/Units Produced
= ($3400+$25280+$1140+$4180)/17000 = $2 per unit
Finished Goods inventory (in unit) :
Year 1 = $6,000/$2 = 3000 units
c. Compute the selling price per unit.
Selling price per unit = Revenues / units sold
Units sold = Units produced - units in the ending finished goods inventory = 17000-3000 = 14000
Selling price per unit = $52,500/14000 = $3.75
d.Compute the operating profit (loss) for year 1
Operating income for the year :
Revenues $52,500
Cost of goods sold (14000*$2) (28000
)
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Gross Margin $24,500
Less marketing and administrative cost:
Variable cost ($2,350)
Fixed cost ($11,800)
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($14,150)
Operating Profit $10,350
