Question

Use the information below to answer the following

question(s).

The following information pertains to Brady's Tires: Manufacturing costs S1,700,000

Units manufactured 20.000

Units sold

19 500 units sold for $85 per unit

Beginning inventory units

1. What is the average manufacturing cost per unit?

a. $55.10

b. $56.00

c. $54.18

d. $85.00

e. $54.19

2. What is the amount of ending finished goods inventory?

a. $27,550

b. $28,000

c. $27,090

d. $42,500

e. $27,095

3. What is the amount of gross margin?

a. $882,050

b. S885,500

c. $909,190

d. SO

e. $908,895

Answer 1

Question 1

Average Manufacturing Costs = Total Manufacturing Costs / Number of Units Produced

Total Manufacturing Costs = $ 17,00,000

Number of Units Produced = 20,000 Units

Average Manufacturing Costs per Unit = 17,00,000 / 20,000

Average Manufacturing Costs per Unit = $ 85 Per Unit

Option D ($ 85) is the Correct Answer.

Question 2

Cost of Units in Ending Inventory = Units in Ending Inventory * Average Manufacturing Costs per Unit

Average Manufacturing Costs per Unit = $ 85

Units in Ending Inventory = 500

Cost of Ending Finished Goods Inventory = 500 * 85

Cost of Ending Finished Goods Inventory = $ 42,500

Units in Ending Inventory = Units Produced - Units Sold

Units Produced = 20,000 Units

Units Sold = 19,500 Units

Units in Ending Inventory = 20,000 - 19,500

Units in Ending Inventory = 500 Units

Option D ($ 42,500) is the Correct Answer.

Question 3

Gross Margin = Sales Revenue - Cost of Goods Sold

Sales Revenue = 19,500 Units * Selling Price per Unit

= 19,500 * $ 85

= $ 16,57,500

Cost of Goods Sold = Units Sold * Average Manufacturing Costs per Unit

= 19,500 * $ 85

= $ 16,57,500

Gross Margin = 16,57,500 - 16,57,500

Gross Margin = $ 0

Option D ($ 0) is the Correct Answer.