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Prime Cost, Conversion Cost, Preparation of Income Statement: Manufacturing Firm

Kildeer Company makes easels for artists. During the last calendar year, a total of 23,000 easels were made, and 24,000 were sold for $52 each. The actual unit cost is as follows:

- Direct materials: $14.00
- Direct labor: $5.00
- Variable overhead: $5.00
- Fixed overhead: $15.00
- Total unit cost: $39.00

The selling expenses consisted of a commission of $1.00 per unit sold and advertising co-payments totaling $92,000. Administrative expenses, all fixed, equaled $175,000. There were no beginning and ending work-in-process inventories. The beginning finished goods inventory was $140,400 for 3,600 easels.

Required:
1. Calculate the number and the dollar value of easels in the ending finished goods inventory.

Answer :

Final answer:

The number of easels in the ending finished goods inventory is 2,600, and the dollar value of this inventory is $101,400.

Explanation:

To calculate the number and dollar value of easels in the ending finished goods inventory, we need to consider the units produced and sold, as well as the beginning finished goods inventory. In this case, 23,000 easels were produced, and 24,000 were sold. The beginning finished goods inventory was 3,600 easels. So, the ending finished goods inventory would be the units produced minus the units sold plus the beginning finished goods inventory.

Ending finished goods inventory = Units produced - Units sold + Beginning finished goods inventory

  • Ending finished goods inventory = 23,000 - 24,000 + 3,600
  • Ending finished goods inventory = 2,600 easels

To calculate the dollar value of the ending finished goods inventory, we can multiply the total unit cost by the number of easels in the inventory.

  • Dollar value of ending finished goods inventory = Total unit cost x Number of easels in inventory
  • Dollar value of ending finished goods inventory = $39.00 x 2,600
  • Dollar value of ending finished goods inventory = $101,400

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