The MNO Company manufactures pencils. Last year, direct materials costing $800,0
ID: 2560902 • Letter: T
Question
The MNO Company manufactures pencils. Last year, direct materials costing $800,000 were put into production. Direct labor of $400,000 was incurred and overhead equaled $1,000,000. The company had operating income for the year of $100,000 and manufactured and sold 4,000,000 pencils at a sales price of $0.70 per unit. Assume that there were no beginning or ending inventory balances in the work in process and finished goods inventory accounts.
Required:
A.
Compute the per-unit product cost
B.
Compute the per-unit prime cost
C.
Compute the per-unit conversion cost
D.
Compute the gross margin for the year
E.
Compute the selling and administrative expenses for the year
F.
Assume production amounted to 4,000,000 pencils and 3,800,000 were sold. Compute cost of goods sold.
G.
Assume production amounted to 4,000,000 pencils and 3,800,000 were sold. Compute the balance in ending finished goods inventory.
A.
Compute the per-unit product cost
B.
Compute the per-unit prime cost
C.
Compute the per-unit conversion cost
D.
Compute the gross margin for the year
E.
Compute the selling and administrative expenses for the year
F.
Assume production amounted to 4,000,000 pencils and 3,800,000 were sold. Compute cost of goods sold.
G.
Assume production amounted to 4,000,000 pencils and 3,800,000 were sold. Compute the balance in ending finished goods inventory.
Explanation / Answer
A. Unit product cost
Total Revenue = 4000000 * 0.7
= $28,00,000
Operating income = $100,000
Total cost = $27,00,000
No. of units sold = 40,00,000
Per unit product cost= $27,00,000 / 40,00,000
= $0.68
B. Prime cost per unit
C. Conversion cost per unit
D. Gross margin
E. Selling and Administrative expenses
F. Cost of goods sold = unit product cost * no. of units sold
= 0.68*3800000
= $25,65,000
G. Balance in ending finished goods inventory = 40,00,000 - 38,00,000
= 2,00,000 units
Total Revenue = 4000000 * 0.7
= $28,00,000
Operating income = $100,000
Total cost = $27,00,000
No. of units sold = 40,00,000
Per unit product cost= $27,00,000 / 40,00,000
= $0.68
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