Question:
Finding Unknowns
Mary's Mugs produces and sells various types of ceramic mugs. The business began operations on January 1, Year 1, and its costs incurred during the year include these:
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Variable costs (based on mugs produced):
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Direct materials cost
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$ 6,000
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Direct manufacturing labor costs
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27,000
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Indirect manufacturing costs
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5,400
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Administration and marketing
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3,375
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Fixed costs:
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Administration and marketing costs
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18,000
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Indirect manufacturing costs
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6,000
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On December 31, Year 1, direct materials inventory consisted of 3,750 pounds of material. Production in that year was 20,000 mugs. All prices and unit variable costs remained constant during the year. Revenues for year 1 were $73,312. Finished goods inventory was $6,105 on December 31, Year 1. Each finished mug requires 0.4 pounds of material.
Required
Compute the following:
a. Direct materials inventory cost, December 31, Year 1.
b. Finished goods ending inventory in units on December 31, Year 1.
c. Selling price per unit.
d. Operating profit t for year 1.