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In: Accounting

Octaone produces luxury water cooler. This is their first year in operation (i.e. starting the year...

Octaone produces luxury water cooler. This is their first year in operation (i.e. starting the year with $0 balances). The company produced 9,000 units (started and completed) and sold 8,000 units for $560,000. Octaone paid $10 per unit in direct materials and $5 per unit in wages for production workers. Lease payments and utilities on the production facilities amounted to $22,500 and selling & administrative expenses were $17,000.

Answer the following questions about Octaone.

A. What is the cost per unit of a water cooler?

B. What is the gross margin per unit of a water cooler?

C. What is the balance in the inventory account before any water coolers were sold?

D. What is the cost of goods sold for the year?

E. What is the cost of inventory on the balance sheet at the end of the year?

F. What is the net income for the year?

Label and place your final answer for A-F at the top of the answer box. Then after the answer to F, label and show your work for each part of the question. Just show me numbers – that is usually enough for me to follow your logic.

Solutions

Expert Solution

--Requirement A

Direct Material per unit $                                   10.00
Direct Labor per unit $                                     5.00
Manufacturing Overhead $              22,500.00
Units produced 9000
Manufacturing overhead per unit [22500 / 9000] $                                     2.50
Cost per unit $                                   17.50

--Requirement B

A Sale price per unit [560000 / 8000] $                      70.00
B Cost per unit $                      17.50
C = A - B Gross Margin per unit $                      52.50

--Requirement C

A Cost per unit $                      17.50
B Units produced                          9,000
C = A x B Balance in Inventory account before sale $           157,500.00

--Requirement D

A Cost per unit $                      17.50
B Units sold                          8,000
C = A x B Cost of Goods Sold $           140,000.00

--Requirement E

A Cost per unit $                      17.50
B Units in ending Inventory                          1,000
C = A x B Cost of Inventory on Balance Sheet $              17,500.00

--Requirement F

A Gross Margin per unit $                      52.50
B Units Sold                          8,000
C = A x B Total Gross Profits $           420,000.00
D Selling & Admin expenses $              17,000.00
E = C - D Net Income $           403,000.00

ekkarill92 answered 10 months ago
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