Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 28

Finding Unknowns

BS&T Partners has developed a new hubcap with the model name Spinnin’Wheel. Production and sales started August 3. As of August 2, there were no direct materials in inventory. Data for the month of August include the following:

Direct labor cost per unita	$6.25
Direct labor hours worked, August	_______
Direct labor wage rate per direct-labor hour	$20.00
Direct materials cost per unita	$5.00
Direct materials cost per pound of direct material	$10.00
Direct materials inventory (cost), August 31	$3,500
Direct materials inventory (units), August 31	_______
Finished goods inventory (cost), August 31	$10,800
Finished goods inventory (units), August 31	_______
Manufacturing overhead cost per unita	$15.75
Operating profit, August	$55,200
Production (units), August	_______
Revenues, August	$414,000
Sales (units), August	_______
Selling price per unit	_______
Selling, general, and administrative costs per unitb	$12.00

a Unit cost based on units produced in August.

b Unit cost based on units sold in August.

Required

Complete the table.

Step 1 of 6

Note: This problem is challenging, because there is no indication of how to begin or the order in which to solve for the unknowns.

We begin by computing the following unit costs:

Manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead

??= $5.00 + $6.25 + $15.75 = $27.00

Full cost per unit = Manufacturing cost per unit + Selling, general&administrative

??= $27.00 + $12.00 = $39.00

a. Direct material inventory (pounds) = Direct material inventory (cost) ÷ Cost per pound

???    = $3,500 ÷ $10.00 = 350 pounds.