Question

Assume you are starting a new business involving the manufacture and sale of a new product. Raw materials costs are $70 per product. Direct labor costs are expected to be $50 per product. You expect to sell each product for $130. You plan to produce 90 products next month and expect to sell 80 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 100 products but expect sales in the month to be 105 products. Prepare cost of production, cost of goods sold, and inventories schedules for the second month.

Answer 1

Month	1	2
Opening inventory	0	10
Production	90	100
Sales	80	105
Closed inventory	10	5
RM costs / unit	70	70
Labor costs / unit	50	50
RM costs	6300	7000
Labor costs	4500	5000
Total	10800	12000
Cost of production	10800	12000
Cost of inventory	1200	600
Cost of goods sold	9600	12600