A company has the following information for its first month of operations: $\begin{array}{lr}
\text { Raw materials used } & \$ 25,000 \
\text { Sales } \$ 65 \text { per unit) } & \$ 91,000 \
\text { Direct labor } & \$ 42,000 \
\text { Variable factory overhead } & \$ 17,000 \
\text { Fixed factory overhead } & \text { unknown } \
\text { Variable selling and administrative } & \$ 3,000 \
\text { Fixed selling and administrative } & \$ 5,000 \
\text { Gross profit } & \$ 30,000 \
\text { Contribution margin } & \text { unknown }\\
\text { Ending inventories: }\\
\text { Raw materials } & \$ 7,000 \
\text { WIP } & \text { none } \
\text { Finished goods } & 1,200 \text { units }
\end{array}$ _____ units were produced during the period.
A)0
B)1,200
C)2,600
D)3,600

Question

Quizplus · Accepted Answer

To find the number of units produced, we first calculate the cost of goods sold (COGS) and then use the sales and gross profit information. Given:- Sales = $91,000- Gross profit = $30,000COGS = Sales - Gross profit = $91,000 - $30,000 = $61,000The COGS includes raw materials used, direct labor, and variable and fixed factory overhead. However, we don't have the fixed factory overhead, but it's not needed to find the number of units produced.Total variable costs (raw materials used + direct labor + variable factory overhead) = $25,000 + $42,000 + $17,000 = $84,000Since there are no work-in-process inventories, the total manufacturing costs are for the units sold and the ending finished goods inventory.To find the cost per unit, we divide the total variable costs by the number of units produced. However, we need to find the number of units first.We know the sales were $91,000 at $65 per unit, so the number of units sold = $91,000 / $65 = 1,400 units.Given the ending finished goods inventory is 1,200 units, the total units produced = units sold + ending inventory = 1,400 + 1,200 = 2,600 units.

A Company Has the Following Information for Its First Month