Question

Finch Manufacturing Company began operations on January 1. During the year, it started and completed 1650 units of product. The financial statements are prepared in accordance with GAAP. The company incurred the following costs 1. Raw materials purchased and used $3,150. 2 Wages of production workers-$3,510 3. Salarnies of administrative and sales personnel-$1,970. 4. Depreciation on manufacturing equipment-$5.220. 5. Depreciation on administrative equipment-$1,795 Finch sold 1,050 units of product Required a. Determine the total product cost for the year b. Determine the total cost of the ending inventory. (Do not round intermediate calculations.) c. Determine the total of cost of goods sold (Do not round intermediate colculations) a Total product cost t□Total costo, ending nventory c. Total cost of goods sold

Answer 1

a.

This is the cost of production for making 1,050 units.

Product cost per unit should be calculated first.

Product cost per unit = (Material + Wages + Depreciation on manufacturing equipment) / Units of product

                                    = (3150 + 3510 + 5,220) / 1,650

                                    = 11,880 / 1,650

                                    = $7.2

Since 1,050 units are sold, total product cost would be as below:

Total product cost = Product cost per unit × Units sold

                              = $7.2 × 1,050

                              = $7,560 (Answer)

b.

Ending inventory cost = Product cost per unit × Units not sold

                                    = $7.2 × (1650 – 1050)

                                    = 7.2 × 600

                                    = $4,320 (Answer)

c.

Cost of goods sold = Total product cost + Total period cost

                                = 7560 + (Salaries + Depreciation on administrative equipment)

                                = 7560 + (1970 + 1795)

                                = 7560 + 3765

                                = $11,325 (Answer)