Can U Do This (at home)? On 7/1, there were 8,000 units in inventory. During Jul

Question

Can U Do This (at home)? On 7/1, there were 8,000 units in inventory. During July, UGA, Inc sold 2.500 units at $20/unit. Unit Determine the total unit production cost at d erent levels o production based on #units PRODUCED Level ofProduction 1,000 units | 2,500 units int 5,000 units 7/31 Inventory (units) 7/31 Inventory balance (S) Operating Expenses: Unit operating expenses based on Unit Total Variable Fixed Total $3,250 5,000 Do you expect GAAP or VC income to be higher when production is 1,000 u? 2,500 units? 5,000 units? Why? GAAP Cost of Goods sold Solution: Can U Do This (at home) See details of problem on previous page Determine the total unit production cost at different levels of production: based on tuni Level of Production Unit variable production costs + Unit fixed production costs$20.00/unit Total unit production costs$25.00/unit 5,000 units $5.00/unit $4.00/unit $9.00/unit 1,000 units $5.00/unit 2,500 units $5.00/unit $8.00/unit $13.00/unit 10,500 units 7/31 Inventory (units): 7/31 Inventory balance () 6,500 units $162,500 8,000 units 104,000 $94,500 Unit operating expenses based on Operating Expenses: Total Unit # units sold $1.30/unit Variable: Fixed Total $3,250 5,000 $8,250 Do you expect GAAP or VC income to be higher when production is 1,000 u 2,500 units? 5,000 units? Why?

Explanation / Answer

Answer:

1. Calculation of closing inventory (Amounts in $)

Particulars Units Units Units Opening Inventory 8000 6500 8000 Add : Production 1000 1500 2500 Less : Sales (2500) NIL NIL Closing inventory 6500 8000 10500 Closing Inventory Balance (given) 162,500 104,000 94,500 Total cost 25/unit 13/unit 9/unit Variable cost per unit (20% of Total cost) 5/Unit 5/unit 5/ unit Fixed cost per unit (Difference of total cost - variable cost) 20/unit 9/uit 4/unit

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