Manufacturing statements and cost behavior
Tampa Foundry began operations during the present 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 given.
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, correspondingly There is no work in process. Tampa carries its finished goods inventory at average unit cost of production.
Instructions:
a. Evaluate the cost of the finished goods inventory of light-gauge aluminum.
b. Prepare an income statement for the current year ended 31st December
c. On the basis of the information presented:
1. Does it seem that the company pays commissions to its sales staff? Describe.
2. What is the likely effect on $4.50 unit cost of direct materials if next year's production increases and why?