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a company had a total revenue of $169,000 in a period from the sale of 6500 units of the single of its single product , there was no finished goods inventory at the beginning of the beginning of the period and 200 units were in inventory at the end of the period were
Variable costs 93,130
Fixed costs 41,540
Fixed costs are absorbed on an actual basis using units producedwhat was the gross profit in the period
I assume that you are asking for my help and not just setting me a test 🙂
I do not know where you got this question from, but the wording is not possible in the real exam (because the absorption rate would always be based on budget figures, and you are not given information about the budget).
However, the way it is worded, the gross profit is sales less cost of sales.
The cost of sales is the cost of production less the closing inventory.
The cost of production is 93,130 + 41,540.
The cost per unit is the cost of production divided by the unit produced (6500)
The closing inventory will be valued at this cost per unit.Dear Mr Moffat
I was just asking for your insight to this question as i myself was having some major problems with this question even after setting this question in point form.
This question was on an acca website the question is as stated on the website.
IHi there,
I doubt on the question above from Kathleen, I think that the information given is tricky.
As it have been stated, “a total revenue of $169,000 in a period from the sale of 6500 units of the single of its single product. 200 units were in inventory at the end of the period”.I think the number of units produced for the period is 6700 (which 6500 were sold and 200 were held in the store).
Could you please clarify? because sometimes when i do the exam i misleading the information given, then it will lead me to chose the wrong answer.
Thanks
kthida: You are correct – sorry it was my mistake 🙁
(It had been a hard day at work 🙂 )
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the answer for gp is 38350…
firstly, find the unit price for the sales, variable cost and fixed cost…
then use sales minus variable and fixed cost…lastly times with 6500…
actually it sold 6500 but produced 6700…
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