Question

On April 1st, an automobile manufacturer had no beginning inventories and, it purchased 8,400 batteries at a cost $90 per battery. It withdrew 7,800 batteries from the storeroom during the month. Of these, 50 were used to replace batteries in cars being used by the company's traveling sales staff. The remaining batteries withdrawn from the storeroom were installed in cars being manufactured by the company. Of the cars in production during April, 80 percent were completed and transferred from work in process to finished goods. Of the cars completed during the month, 20 percent were unsold at April 30th. How much of the total battery cost would be recorded as Selling Expense for the month of April

Answer 1

Answer:

The total battery cost recorded as Selling Expense = $4,500 ($90 * 50 batteries)

Explanation:

a) Data and Calculations:

Work-in-process Inventory

                                        Units    Unit Cost    Total

Purchase of batteries = 8,400      $90          $756,000

Used batteries:

 Selling staff                     (50)      $90                4,500

 Production                 (7,750)      $90            697,500

Ending inventory            600       $90              54,000

Finished goods inventory:

Production                   (7,750)     $90            697,500

Finished goods (80%) 6,200      $90            558,000

Cost of goods sold and ending inventory of finished goods:

Cost of batteries sold 4,960     $90            $446,400

Ending inventory         1,240     $90               $111,600

b) The cost of batteries recorded as Selling Expense is the cost for the 50 batteries used by the company's traveling sales staff.  It is determined by multiplying 50 by $90, the unit cost of each battery.