Selected account balances for the year ended 31 December are provided below for Superior Company: Inventory balances at the beginning
Selected account balances for the year ended 31 December are provided below for Superior Company:
Inventory balances at the beginning and end of the year were as follows:
The total manufacturing costs for the year were £683,000; the goods available for sale totalled £740,000; and the cost of goods sold totalled £660,000.
1. Prepare a schedule of cost of goods manufactured in good form and the cost of goods sold section of the company's statement of profit or loss for the year.
2. Assume that the pound amounts given above are for the equivalent of 40,000 units produced during the year. Compute the unit cost for direct materials used and the unit cost for rent on the factory building.
3. Assume that in the following year the company expects to produce 50,000 units. What per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (In preparing your answer, you may assume that direct materials is a variable cost and that rent is a fixed cost.)
4. As the manager in charge of production costs, explain to the managing director the reason for any difference in unit costs between Requirement 2 and Requirement 3 above.
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