*PLEASE ONLY ATTEMPT IF YOU KNOW COST ACCOUNTING* *Answer: 3,333 PLEASE SHOW HOW
ID: 2481106 • Letter: #
Question
*PLEASE ONLY ATTEMPT IF YOU KNOW COST ACCOUNTING*
*Answer: 3,333 PLEASE SHOW HOW TO GET THIS ANSWER. THANK YOU.
Hickory Inc is facing a problem with their 4th quarter absorption costing net operating income on December 25. Their net operat eir net operating income target is $2,000,000 and the data so far is as follows: Sales Revenue Variable COGS Fixed OH Fixed S&A; Variable S&A;: Commission on Sales $25,000,000 ($500/unit) $10,000,000 ($200/unit) $12,000,000 $1,000,000 3% Hickory has had a policy of having zero inventories at the end of each quarter. No further sales are possible during the year and all the units produced so far have been sold. The CEO is planning to produce items for inventory in the last week of December to meet the net operating income target. How many units (nearest whole number) need to be produced for inventory to meet the net operating income target if the sales commission is left unchanged at 3%?Explanation / Answer
Answer:
FOH needs to be expensed = $25 Million - $10 Million - $1 Million - $25 Million *3% - $2 Million
FOH needs to be expensed = $25 Million - $10 Million - $1 Million - $750000 - $2 Million = $11.25 Million
FOH to be deferred to FG inventory = $12 million - $11.25 million = $0.75 million
FOH per unit = 11250000/(25000000/500) = 11250000/50000 = $225
# of units need to be produced = 12000000/225 = 53333 units
Therefore, 53333 - 50000 = 3333 units will be left in FG inventory.
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