Assume Air Tec manufactures only one component for the air conditioning industry.In 2013 the company produced 12 000 units of the component of which 10 000 were sold.The following costs were recorded for 2013:
$\begin{array}{llcc}
&\text { \$ }\
\text { Direct material} &500000 \
\text {Direct labour } &150000\
\text { Manufacturing overhead } &220000\
\text { Administrative expenses } & 97000\
\end{array}$

If there were 1000 units in beginning inventory,calculate the cost of sales for Air Tec for 2013.
A)$72 500
B)$145 000
C)$217 500
D)$725 000

Question

Assume Air Tec manufactures only one component for the air conditioning industry.In 2013 the company produced 12 000 units of the component of which 10 000 were sold.The following costs were recorded for 2013:
$\begin{array}{llcc}
  &\text { \$ }\
  \text { Direct material} &500000  \
 \text {Direct labour  } &150000\
 \text { Manufacturing overhead } &220000\
 \text { Administrative expenses } &  97000\
\end{array}$

If there were 1000 units in beginning inventory,calculate the cost of sales for Air Tec for 2013.
A)$72 500
B)$145 000
C)$217 500
D)$725 000

Quizplus · Accepted Answer

The cost of sales is calculated by determining the cost per unit and multiplying by the number of units sold. Total production cost = Direct material + Direct labour + Manufacturing overhead = $500,000 + $150,000 + $220,000 = $870,000. Cost per unit = $870,000 / 12,000 units = $72.50. Cost of sales for 10,000 units sold = 10,000 * $72.50 = $725,000.

Assume Air Tec Manufactures Only One Component for the Air