Question

Use the information below to answer the following question(s). The following information pertains to Brady’s Tires:...

Use the information below to answer the following question(s).

The following information pertains to Brady’s Tires:

Manufacturing costs

$1,700,000

Units manufactured

20,000

Units sold

19,500 units sold for $85 per unit

Beginning inventory

0 units
  1. What is the amount of ending finished goods inventory?
    1. $27,550
    2. $28,000
    3. $27,090
    4. $42,500
    5. $27,095

  1. What is the amount of gross margin?
    1. $882,050
    2. $885,500
    3. $909,190
    4. $0
    5. $908,895
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Homework Answers

Answer #1

d. $42,500

Explanation:

No of units in Finished inventory = Beginning Inventory + Units Manufactured - Units sold

= 0 + 20,000 -19,500

= 500 Units.

Cost per unit = Manufacturing costs / Units Manufactured

= $17,00,000 / 20,000 Units

= $85 per unit

Finished Inventory in value = Finished inventory(Units)*Cost per unit

= 500 units*$85

= $42,500.

d. $0

Explanation:  

Gross margin = Sales - Cost of Goods sold

Sales = Sales( Units)* Selling price per unit

= 19,500 units*$85

= $16,57,500.

Cost of Goods sold = Sales( Units)* Cost per unit

= 19,500 Units *$85

= $16,57,500

Gross margin = Sales - Cost of Goods sold

= $16,57,500 - $16,57,500

= $0.

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