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Chapter 1 Problem - Solutions

# Chapter 1 Problem - Solutions - Chapter 1 Problems...

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Chapter 1 Problems - Solutions 1. Sugars Company makes candy. During the most recent accounting period Sugars paid \$5,000 for raw materials, \$6,000 for labor, and \$3,000 for overhead costs that were incurred to make candy. Sugars started and completed 20,000 units of candy of which 16,000 were sold. How much product cost did the company incur during the year? Product Cost = Material + Labor + Manufacturing Overhead = \$5,000 + \$6,000 + \$3,000 = \$14,000 What is the cost per unit? Cost per Units = Total Product Cost / # of units completed = \$14,000 / 20,000 = \$0.70 How much expense did the company recognize on the income statement? COGS = Cost per unit * # of units sold = \$0.70 * 16,000 = \$11,200 2. Newman industries makes baby diapers. During the most recent accounting period, NI paid \$90,000 for raw materials, \$78,000 for labor, and \$82,000 for overhead costs that were incurred to start and complete 125,000 boxes of diapers. G,S, & A expenses amounted to \$120,000. Assuming NI desires to earn a gross profit that is equal to 60% of product cots, the selling price per box of diapers should be: Product Cost = \$90,000 + 78,000 + 82,000 = \$250,000 Cost per unit = \$250,000 / 125,000 = \$2 Selling Price = \$2 * 60% = \$1.20 + \$2.00 = \$3.20

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Chapter 1 Problem - Solutions - Chapter 1 Problems...

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