Question

P2-45 (similar to) Houston Office Equipment manufactures and sells metal shelving. It began operations on January 1, 2017 (Click the icon to view the costs incurred during 2017.) (Click the icon to view the inventory data.) Revenues in 2017 were $491,400. The selling price per unit and the purchase price per pound of direct materials were stablo cost for 2017. Finished-goods inventory at December 31, 2017, was $20,970. Read the requirements. Requirement 1. Calculate direct materials inventory, total cost, December 31, 2017 Determine the formula, then calculate ending direct materials total cost. = Ending direct materials total cost i Requirements 1. Calculate direct materials inventory, total cost, December 31, 2017 2. Calculate finished-goods inventory, total units, December 31, 2017 3. Calculate selling price in 2017. 4.Calculate operating income for 2017

Answer 1

1. Given: Two pounds of direct material used to make one unit of finished goods. Therefore: Production 100,000 units x 21bs =200,0001bs Per unit = Direct material used ÷ 200,000 lbs. = $140,000 + 200,000 lbs. = $0.70 Calculate ending direct material cost: Ending direct material total cost =Ending Direct materi al Inventory xCost perlb =2100 x $0.70 =$1470 2. Compute finished goods inventory, total units, December 31, 2017 as follows:

Manufacturing cost for 100,000 units Direct material costs $140,000 Add: Direct manufacturing labor costs Add: Plant energy costs Add: Indirect manuafcturing labor costs ($16000+S15000) Add: Other indirect manuafcturing costs ($11000+$25000) Cost of goods manufactured $22,000 $4,000 $31,000 $36,000 $233,000 Average unit manufacturing cost per unit ($233,000/100,000) $2.33 Finished goods Inve Finished goods inventory total units ($20970/S2.33) Dec. 31, 2017 $20 огy 9,000 units 3. Compute selling price in 2017 as follows: Unit Soldin 2017=Beginning Inventory+Production -Ending inventory =0+100,000-9,000 =91,000 units

Totalrevenues Selling price in 2017 Units Sold $491,400 91,000 $5.4per unit 4. Working as follows: Beginning finished goods, Jan. 01, 2017 Add: Cost of goods manufactured Cost of goods available for sale Less: Ending finished goods, Dec. 31, 2017 COGS $233,000 $233,000 ($20,970) $212,030 Compute operating income for 2017 as follows:

Revenues (91,000 units sold x $5.4) Less: COGS Gross profit Less: operating expense Marketing, distribution, and customer-service cost (S125000+S46000) Administraive cost Net Operating Income $491,400 (S212,030) $279,370 ($171,000)| ($57,000) $51,370