Various cost and sales data for Meriwell Company for the just completed year appear in the worksheet below:
Finished goods inventory, beginning $20,000
Finished goods inventory, ending $40000
Administrative expenses $110000
Manufacturing overhead $105000
Purchases of raw materials $125000
Raw materials inventory, beginning $9000
Raw materials inventory, ending $6000
Direct labor $70,000
Work in process inventory, beginning $17000
Work in process inventory, ending $30,000
Sales $500000
Selling expenses $80000
Of the $105000of manufacturing overhead, $15000 is variable and $90,000 is fixed.
Required:
1. Prepare a schedule of cost of goods manufactured.
2. Prepare an income statement
3. Assume that the company produced the equivalent of 10000 units of product during the year just completed. What was the average cost per unit for fixed manufacturing overhead?
4. Assume that the company expects to produce 15000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For fixed manufacturing overhead? Assume that direct materials is a variable cost.
5. As the manager responsible for priduction costs, explain to the president any difference n te average cost per unit between (3) and (4) above.