Heathrow Corporation Sold 12,500 Units of Its Single Product During

question 85

Essay

Heathrow Corporation sold 12,500 units of its single product during the year, reporting a cost of good sold that totaled $250,000. A review of the company's accounting records disclosed the following information: $\begin{array}{lr}\text { Cost of goods sold as a percentage of sales}\\\quad \text { revenue } & 40 \% \\\text { Finished-goods inventory, 1/1 } & \$ 87,000 \\\text { Work-in-process inventory, 12/31 } & 55,000 \\\text { Cost of goods manufactured } & 241,000 \\\text { Raw materials used } & 40,000 \\\text { Direct labor } & 74,000 \\\text { Manufacturing overhead } & 122,000 \\\text { Selling and administrative expenses } & 310,000\end{array}$
Heathrow is subject to a 30% income tax rate.
Required:
A. Determine the selling price per unit.
B. Management established a goal at the beginning of the year to reduce the company's investment in finished-goods inventory and work-in-process inventory.
1. Analyze cost of goods sold and determine if management's goal was achieved with respect to finished-goods inventory. Show computations.
2. Analyze the firm's manufacturing costs and determine if management's goal was achieved with respect to work-in-process inventory. Show computations.
C. Is the company profitable? Show calculations.

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Definitions:

McLafferty Rearrangement

A fragmentation reaction observed in mass spectrometry analysis, involving the transfer of a hydrogen atom via a six-membered transition state leading to the cleavage of a molecule.

Carboxylic Acids

Organic compounds characterized by a carboxyl group (-COOH), known for their acidic properties.

Grignard Reagents

Reactive compounds consisting of magnesium bonded to an organic group, used in the formation of carbon-carbon bonds.

Infrared Spectrum

A representation of the infrared light absorption or emission of a substance, providing information about molecular vibrations and compound identity.