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Tampa Foundry $36

Price: $1.99

Manufacturing statements and cost behavior
Tampa Foundry began operations during the current year, manufacturing various
products for industrial use. One such product is light-gauge aluminum, which the
company sells for $36 per roll. Cost information for the year just ended follows:

Direct materials  4.50
Direct labor  6.50
Factory overhead  9.00 50,000
Selling 70,000
Administrative 135,000

Production and sales totaled 20,000 rolls and 17,000 rolls, respectively. There is no
work in process. Tampa carries its finished goods inventory at the average unit cost
of production.

a. Determine the cost of the finished goods inventory of light-gauge aluminum.
b. Prepare an income statement for the current year ended December 31.
c. On the basis of the information presented, answer the following questions:
1) Does it appear that the company pays commissions to its sales staff? Explain.
2) What is the likely effect on the $4.50 unit cost of direct materials if next year’s
production increases? Why?

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