Taffy Corporation Sells a Number of Products to Groups That

question 76

Essay

Taffy Corporation sells a number of products to groups that provide educational workshops and seminars. One of the products involves a combination leather case and note pad. The company purchases the case and pad combination from a supplier and encloses a $3 pen that contains the educational groups' name and logo.
Taffy began to carry this product at the start of 20x3, acquiring 12,500 cases from Executive Supply for $87,500 along with an identical number of pens from Accent Goods. During 20x3, 9,500 of the cases and pens were issued to Taffy's assembly operation where the pen is added. Eighty percent of these cases were completed as of December 31, and a review of the December 31 finished-goods inventory found 2,600 completed cases in the warehouse. Conversations with salespeople revealed that 70 finished sets were used in various company marketing activities throughout the year.
Required:
A. Determine the cost of the cases and pens that would appear in Taffy's raw materials, work in process, and finished-goods inventory as of December 31.
B. Determine the cost of the cases and pens that would appear in the company's cost of goods sold for 20x3.

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Definitions:

Unit Sales

The number of individual units sold by a company during a specific period.

Degree of Operating Leverage

A measure of how sensitive a company's operating income is to a change in sales, indicating the extent to which fixed costs are used in the production process.

Unit Variable Cost

The cost associated with producing one additional unit of a product, encompassing both materials and labor.

Monthly Sales

The total revenue generated from sales activities within a one-month period.