# F317+Study+Guide+7+Answers+Ch+4 - Chapter 4 MEASURING...

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Chapter 4 MEASURING FINANCIAL PERFORMANCE 2. Assume you have developed and tested a prototype electronic product and are about to start your new business. You purchase pre-programmed computer chips at \$70 per unit. Other component costs include: plastic casings at \$15 per unit and assembly hardware at \$5 per unit. Direct labor costs are \$15 per hour and three units can be produced per hour. You intend to sell each unit at a 50 percent mark-up over the total costs of producing each unit. The plan is to produce 500 product units per month in January, February, and March. Sales are expected to be: 200 units in January, 400 units in February, and 800 units in March. A. Calculate the dollar amount of sales revenue expected in each month (i.e., January, February, and March) and for the first quarter of the year. Computer chips \$70 Plastic casings 15 Assembly hardware 5 Direct labor (\$15/3) 5 Total costs \$95 Mark-up = \$95(1.5) = \$142.50 Dollar Sales: January: 200 units x \$142.50 = \$28,500 February: 400 units x \$142.50 = \$57,000 March: 800 units x \$142.50 = \$114,000 First Quarter \$199,500 B. Prepare a cost of production schedule for January, February, and March. Cost of Production Schedule: Cost Per Unit January February March Production (units) 500 500 500 Production costs Computer chips \$70 \$35,000 \$35,000 \$35,000 Plastic casings 15 7,500 7,500 7,500 Assembly hardware 5 2,500 2,500 2,500 Direct labor 5 2,500 2,500 2,500 Total costs \$95 \$47,500 \$47,500 \$47,500 C. Prepare a cost of goods sold schedule for each of the three months and for the first quarter of the year. Using your cost of goods sold estimates and the sales revenues 56

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Chapter 4: Measuring Financial Performance expected in Part A, calculate the gross earnings for January, February, and March, as well as for the first quarter of the year. Cost of Goods Sold Schedule: January February March Total Sales (units) 200 400 800 1,400 Costs @ \$95/unit \$19,000 \$38,000 \$76,000 \$133,000 Gross Earnings Estimate: Sales (dollars) \$28,500 \$57,000 \$114,000 \$199,500 Less: cost of goods sold 19,000 38,000 76,000 133,000 Gross earnings \$9,500 \$19,000 \$38,000 \$66,500 D. Prepare an inventories schedule for January, February, and March. Inventories Schedule:
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