Question

Vernon Manufacturing Company began operations on January 1. During the year, it started and completed 1,620 units of product. The financial statements are prepared in accordance with GAAP. The company incurred the following costs:

1. Raw materials purchased and used—$3,150.
2. Wages of production workers—$3,480.
3. Salaries of administrative and sales personnel—$1,990.
4. Depreciation on manufacturing equipment—$4,710.
5. Depreciation on administrative equipment—$1,820.

Vernon sold 1,160 units of product.

Required

1. Determine the total product cost for the year.

2. Determine the total cost of the ending inventory. (Do not round intermediate calculations.)

3. Determine the total of cost of goods sold. (Do not round intermediate calculations.)

total product cost = 11,340$

total cost of ending inventory= ????

total cost of goods sold=???

Answer 1

Raw materials purchased and used = $3,150.

Wages of production workers = $3,480.

Salaries of administrative and sales personnel = $1,990.

Depreciation on manufacturing equipment = $4,710.

Depreciation on administrative equipment = $1,820.

Total product cost = Raw materials purchased and used + Wages of production workers + Depreciation on manufacturing equipment

= 3,150 + 3,480 + 4,710

= $11,340

Number of units produced = 1,620

Number of units sold = 1,160

Ending inventory units = Number of units produced - Number of units sold

= 1,620 - 1,160

= 460

Product cost per unit = Total product cost/Number of units produced

= 11,340/1,620

= $7

Total cost of ending inventory = Ending inventory units x Product cost per unit

= 460 x 7

= $3,220

Total cost of goods sold = Number of units sold x Product cost per unit

= 1,160 x 7

= $8,120