Question

I'd be grateful if someone could show how to approach this management accounting problem. Thanks in advance.

Soo Office Equipment manufactures and sells metal shelving. It began operations on January 1, 2013. Costs incurred for 2013 are as follows (V stands for variable; F stands for fixed): Direct materials used costs Direct manufacturing labour costs Plant energy costs Indirect manufacturing labour costs Indirect manufacturing labour costs Other indirect manufacturing costs Other indirect manufacturing costs Marketing, distribution, and customer-service costs Marketing, distribution, and customer-service costs Administrative costs $140,000 V 30,000 V 5,000 V 10,000 V 16,000 F 8,000 V 24,000 F 122,840 V 40,000 F 50,000 F Variable manufacturing costs are variable with respect to units produced. Variable marketing, distribution, and customer-service costs are variable with respect to units sold. Inventory data are as a follows: Beginning, January 1, 2013 Ending December 31, 2013 Direct materials Work in process Finished goods 0 kilograms 0 units 0 units 2,000 kilograms O units ? units Production in 2013 was 100,000 units. Two kilograms of direct materials are used to make one unit of finished product Revenues in 2013 were $436,800. The selling price per unit and the purchase price per kilogram of direct materials were stable throughout the year. The company's ending inventory of finished goods is carried at the average unit manufacturing costs for 2013. Finished goods inventory at December 31, 2013, was $20,970. Required 1. Calculate direct materials inventory, total cost, December 31, 2013. 2. Calculate finished goods inventory, total units, December 31, 2013. 3. Calculate selling price per unit in 2013. 4. Calculate gross margin and operating income for 2013 (show your computations). per unit in 2013 al units, December 31, 2013.

Answer 1

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Calculate Direct Material Inventory, Total Cost, Dec 2013
First calculate direct material used, and cost per pound
Direct material Used	Unit Produced * Direct Material / Unit
( 100,000 * (2 kg of direct Material are used to make one unit of finished goods	2,00,000
Cost per pound Direct Material $	Direct material cost/Direct Material used
Direct Material used $ 140,000	0.70
Direct material Used=== 200,000
Direct Material Inventory Total cost $	Direct material at end *cost per pund of Direct Material
Direct Material at end = 2000 Kg	1,400
Cost per pound Direct Material $== 0.70

Compute Finished Goods Inventory , Total Unit, Dec 2013
calculate cost of goods manufactired
	Variable $	Fixed $	Total $
Direct Material cost	1,40,000		1,40,000
Direct Manufacturing Labour cost	30,000		30,000
Plant energy Cost	5,000		5,000
Indirect Manufacturing labour cost	10,000	16,000	26,000
Other Indirect manufacturing cost	8,000	24,000	32,000
Cost of goods manufactured	1,93,000	40,000	2,33,000
Cost of goods manufactured $ A	2,33,000
Production in Year Unit-B	1,00,000
Average unit Manufacturing cost (A/B) $/ Unit=c	2.33
Finished goods Inventory at end $=d	20,970
Finished goods Inventory Total Unit (d/c)	9,000

Calculate Selling price
Selling price	Revenue /Number of Units Sold
Number of Units Sold
Opening Inventory	-
Purchase / Production	1,00,000
Less closing Inventory	9,000
Number of Units Sold B	91,000
Revenue $ A	4,36,800
Selling price	(A/B)
Selling price $/ Unit	4.80

Calculate Gross Margin
Revenue ( Number of Unit to sold* rate per unit )	Amnt($)	Amnt($)
Revenue (91000 Units * $4.80 / unit )-A		4,36,800
Less
Cost of Goods sold =B
Opening Inventory	-
Add- cost of goods manufactured	2,33,000
cost of goods available for sale	2,33,000
Less - End of Finished goods	20,970
Cost of Goods sold =B		2,12,030
Gross Margin(A-B)		2,24,770
General & Admin cost
Marketing distribution and customer service (V+Fixed cost)
Marketing distribution and customer service (Variable)	1,22,840
Marketing distribution and customer service (Fixed	40,000	1,62,840
Administraive cost		50,000
Net Income		11,930