Xi Manufacturing, Which Began Operations on January 1 of the Current

question 43

Essay

Xi Manufacturing, which began operations on January 1 of the current year, produces an industrial scraper that sells for $325 per unit. Information related to the current year's activities follows. $$\begin{array} { l r } \text { Number of scrapers produced } & 20,000 \\\text { Number of scrapers sold } & 17,000 \\\text { Variable costs per unit: } & \\\quad \text { Direct materials } & \$ 25 \\\quad \text { Direct labor } & 35 \\\quad \text { Manufacturing overhead } & 60 \\\text { Annual fixed costs: } & \\\quad \text { Manufacturing overhead } & \$ 400,000 \\\quad \text { Selling and administrative } & 140,000\end{array}$$
Xi carries its finished-goods inventory at the average unit cost of production. There was no work in process at year-end.
Required:
A. Compute the company's average unit cost of production.
B. Determine the cost of the December 31 finished-goods inventory.
C. Compute the company's cost of goods sold.
D. If next year's production increases to 23,000 units and general cost behavior patterns do not change, what is the likely effect on:
1. The direct-labor cost of $35 per unit? Why?
2. The fixed manufacturing overhead cost of $400,000? Why?

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Definitions:

Relative Frequency Approach

A method of estimating probabilities based on the proportion of observed occurrences of an event relative to the total number of trials.

Subjective Approach

A method of decision making or analysis that is based on personal judgment, opinions, or preferences rather than objective data.

Simple Event

An event consisting of only one outcome in a probability experiment.

Sample Space

The set of all possible outcomes of a random experiment or event.