Fresh Air Products Company manufactures and sells a variety of camping products.

Question

Fresh Air Products Company manufactures and sells a variety of camping products. Recently the company opened a new plant to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operations are shown below:
Manufacturing Costs
Fixed Overhead $120,000
Variable overhead $3 per unit
Direct labor $12 per unit
Direct material $30 per unit
Beginning inventory 0 units
Units produced 10,000
Units sold 8,000
Selling and Administrative Costs
Fixed $200,000
Variable $4 per unit sold

The portable cooking unit sells for $110. Management is interested in the opening month

Explanation / Answer

units produced =10,000 units sold =8,000 sales = unit sale prize *units sold =110*8,000 =$ 880,000 cost of goods sold direct labor =12*10,000 =$120,000 overhead cost fixed =$120,000 variable =3*10,000=$30,000 total overhead = $150,000 direct material =30*10,000=$ 300,000 cost of goods sold = 120,000+150,000+300,000 =$ 570,000 gross profit = sales -cost of goods = 880,000-570,000 = $ 310,000 selling and administrative cos fixed =$ 200,000 variable = 8000*4 =$ 32,000 total administrative and selling expenses =$ 232,000 net income =gross profit -232,000 =310,000-232,000 = $78,000 so we have $ 78,000 net profit and 2,000 units of product as inventory at the end of period.

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