Cost Classification - BPP book

I do not work for BPP and so I do not have the BPP book. I need the rest of the question to be able to explain. I can only guess that maybe the production was 100 units? (and so 20 left in inventory)

Sorry! The whole example is as follows .... I just done understand how they get to the value of the unsold inventory A business has the following costs for a period Materials 600 Labour 1000 Production overheads 500 Administration overheads 2,800 During the period 100 units are produced. If all of these costs were allocated to production units each unit would be valued at $28 This would be incorrect. Only production costs are allocated to units of inventory. Administrative overheads are non- production costs. So each unit of inventory should be valued at 21 ((600+1,000+500)/100) This affects both gross profit and the valuation of closing inventory. If during the period 80 units are sold at $40 each, the gross profit will be Sales (80x40) = 3,200 Cost of sales (80x21) = 1,680 Gross profit= 1,520 The value of closing (unsold) inventory will be 420 (20x21) Many thanks for your help John, I'm self studying and now wish I had just used your course notes!! I am combining this book with your lectures which I find most useful so thank you

Both the cost of sales, and any closing inventories, are valued at the production cost per unit. Are you happy with how they have calculated the $21? (The total production costs are $2,100, and in total 100 units are produced, so $21 per unit). Of the 100 produced, only 80 were sold and therefore the other 20 remain in inventory. The 80 sold have a cost of 80 x $21; and the 20 left in inventory have a cost of 20 x $21. Hope that makes sense.

Yes, I understand how they reached $21 and with your explanation now understand this example fully. Thank you very much for your help, it's much appreciated.

You are welcome :-)