Assume you are starting a new business involving the manufacture and sale of a n

Question

Assume you are starting a new business involving the manufacture and sale of a new product. Raw materials costs are $40 per product. Direct labor costs are expected to be $30 per product. You expect to sell each product for $110. You plan to produce 100 products next month and expect to sell 90 products.

A.) Prepare cost of production, cost of goods sold, and inventories schedules for next (the first) month.

B.) During the second month, you plan to produce 110 products but expect sales in the month to be 115 products. Prepare cost of production, cost of goods sold, and inventories schedules for the second month.

Explanation / Answer

next month

cost of production = 40*100+30*100 = 7000

COGS = 70*90 = 6300

inventory = 10*70 = 700

B)

cost of production = 70*110 = 7700

COGS = 70*115 = 8050

inventory = 5*70 = 350

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