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 average manufacturing cost per unit?
    1. $55.10
    2. $56.00
    3. $54.18
    4. $85.00
    5. $54.19

  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

Average manufacturing cost per unit = Total manufacturing cost / number of units manufactured

Average manufacturing cost per unit = 1,700,000 / 20,000

Average manufacturing cost per unit = $85 per unit

Option (d) is correct

Closing Inventory = Opening inventory + Units produced - units sold

Closing Inventory = 0 + 20,000 -19500

Closing Inventory = 500 units

Amount of closing inventory = closing inventory units x cost per unit

Amount of closing inventory = 500 x 85 per unit

Amount of closing inventory = $42500

Option (d) is correct

Each unit is sold for $85

profit gross margin per unit = selling price - manufactuing cost

profit gross margin per unit = 85 - 85

profit gross margin per unit = 0

Therefore total gross margin is also 0.

Option (d) is correct

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