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:

Standard Deviations

A measure of the amount of variation or dispersion of a set of values, indicating how much the values deviate from the mean of the set.

Standard Errors

A statistic that measures the dispersion or spread of sample means around the population mean, used to estimate the precision of sample statistics.

Average Run Length

A statistical measure used in quality control that indicates the average number of units processed until a defect is detected.

Control Limits

Boundaries set in process control that indicate the allowable range of variation for a process to be considered in control and functioning correctly.