Carlton Manufacturing Company provided the following details about operations in February: The company also provided details regarding
Carlton Manufacturing Company provided the following details about operations in February:
The company also provided details regarding the balances in the inventory accounts at the beginning and end of the month as follows:
Raw materials used in production cost $135,000, total overhead costs for the year were $170,000, the goods available for sale totalled $360,000, and the cost of goods sold totaled $317,500.
1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company€™s income statement for the year.
2. Assume that the dollar amounts given above are for the equivalent of 15,000 units produced during the year. Compute the average cost per unit for direct materials used, and compute the average cost per unit for rent on the factory building.
3. Assume that in the following year the company expects to produce 20,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials, and for rent on the factory building? Direct materials are a variable cost and rent is a fixed cost.
4. As the manager in charge of production costs, explain to the president the reason for any difference in the average costs per unit between (2) and (3) above.
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