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.
|
Per Unit |
Variable Cost |
Fixed Cost |
|
Direct materials |
$4.50 |
$ — |
|
Direct labor |
6.5 |
— |
|
Factory overhead |
9 |
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.
Instructions:
1. Determine the cost of the finished goods inventory of light-gauge aluminum.
2. Prepare an income statement for the current year ended December 31
3. On the basis of the information presented:
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?