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A company had a total revenue $169,000 in a period from the sales of 6500 units of its single product. there was no finished goods inventory at he beginning of the period and 200 units were in inventory at the end of the period.
Production costs – $93130
Fixed costs – $41,540
Fixed costs are absorbed on an actual basis using units produced. What was the gross profit in the perHi, so 6500 units sold, and 200 units left at year end – in total produced 6700 units.
Fixed costs therefore allocated 41540 on 6700 units = 6.2 per unit.
Production cost 93130 also was used to produce these 6700 units = 13.90
But you sold only 6500 units therefore sales income is 169000 but costs are:
6500 x 13.90 plus 6500 x 6.2 – as only these were sold and the cost is materialised.
The remaining 200 is stock valued (200×13.90) plus (200×6.2)
Will be transferred to cost of sale when sold in next period
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