The following information is available for Skipper Pools, a manufacturer of abov

Question

The following information is available for Skipper Pools, a manufacturer of above-ground swimming pool kits:
2014 2015 Total Units produced 11,370 9,030 20,400 Units sold 10,200 10,200 20,400 Selling price per unit $3,960 $3,960 Direct material per unit $770 $770 Direct labor per unit $1,500 $1,500 Variable manufacturing overhead per unit $203 $203 Fixed manufacturing overhead per year $2,421,810 $2,421,810 Fixed selling and administrative expense per year $1,599,900 $1,599,900
In its first year of operation, the company produced 11,370 units but was able to sell only 10,200 units. In its second year, the company needed to get rid of excess inventory (the extra 1,170 units produced but not sold in 2014), so it cut back production to 9,030 units.

Explanation / Answer

2014 2015 Total Units produced           11,370             9,030        20,400 Units sold           10,200           10,200        20,400 Selling price per unit             3,960             3,960 Particulars P.U Amount($) P.U Amount($) Direct material per unit                770       8,754,900                770    6,953,100 Direct labor per unit             1,500     17,055,000             1,500 13,545,000 Variable manufacturing overhead per unit                203       2,308,110                203    1,833,090 Fixed manufacturing overhead per year       2,421,810    2,421,810 Cost of Production     30,539,820 24,753,000 Add: Opening Stock                  -      3,142,620 Less: Closing Stock       3,142,620               -   Cost of goods sold     27,397,200 27,895,620 Fixed selling and administrative expense per year       1,599,900    1,599,900 Cost of Sales       28,997,100 29,495,520 Sales 40392000 40392000 Profit       11,394,900 10,896,480 Yes, since the Fixed cost is not fully compensated as there is excess capacity. Particulars P.U Amount($) P.U Amount($) Direct material per unit                770       8,754,900                770    6,953,100 Direct labor per unit             1,500     17,055,000             1,500 13,545,000 Variable manufacturing overhead per unit                203       2,308,110                203    1,833,090 Variable cost of production     28,118,010 22,331,190 Add: Opening Stock                  -      2,893,410 Less: Closing Stock       2,893,410               -   Variable cost of goods sold     25,224,600 25,224,600 Fixed manufacturing overhead per year       2,421,810    2,421,810 Fixed selling and administrative expense per year       1,599,900    1,599,900 Cost of Sales       29,246,310 29,246,310 Sales 40392000 40392000 Profit       11,145,690 11,145,690

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