Cruz Inc. manufactures a popular premium toy. During its first year, the company

Question

Cruz Inc. manufactures a popular premium toy. During its first year, the company incurred these costs:

$427000 Cost to manufacture 7000 toys
$110000 Research and development costs
$35000 Cost to ship completed products to retailers

Cruz sells 80% of its products for $183 each.

1. What will Cruz report as sales revenue for Year1?  

2. What will Cruz report as the cost of goods sold for Year1?  

3. What will Cruz report as net income for Year1?  

4. What will Cruz report as inventory on the balance sheet as of the end of Year1?  

Explanation / Answer

1. Sales Revenue: sales price is $183 each and product quantity is 80% of Total 7000 toys which is produced during the year so quantity is 5600 toys.

so sales revenue is 5600*183= $1024800

2. cost of goods sold: for this first of all we have to calculate each cost for 80% (5600 Toys) products sold

Manufacture Cost For 7000 Toys is $427000 so per unit cost is 427000/7000= 61 so cost of manufactur of 5600 toys is 61*5600= $341600

Research and Development cost remains to be equal because this cost have no effect of No. of products to be sold. it occures for all products so Research and development cost is $110000

Shipping Cost Also remain same because here information is not given that how much product is completed so we assume all products are completed and shipped. and this is a whole some amount. not depended on quantity of product. so cost is $35000

Note if any information was given about shipping cost per piece or others than we calculate per piece cost but there we can assume that shipping cost is a one time amount for all products not effected by quantity of products.

Now Cost of goods sold is

Manufacture Cost + Research Development Cost + Shipping Cost

$(341600+110000+35000) = $486600

3. Net income is sales-cost of goods sold

Here sales is $1024800

and cost of goods sold is $(427000+110000+35000)

so net income is 1024800-572000= $452800

Note here Manufacture cost is for all products because cost was incurred for all products for manufacturing company irrespective of goods sold.

4. inventory is 20% because 80$ are sold then remaining is inventory unsold so 20% of 7000 toys = 1400 toys and price is cost of 1400 Toys =

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.