Question

Samuelson will produce 20,000 units in January using level production. If each unit costs $500 to manufacture, what is the dollar value of ending inventory in January if beginning inventory is 10,000 units and January sales are 15,000?

A. Less than $5,000,000

B. Between $5,000,000 and $10,000,000

C. Greater than $10,000,000

D. There will be a shortage.

Answer 1

The dollar value of ending inventory for Samuelson in January, with a level production of 20,000 units at $500 each, beginning inventory of 10,000 units, and sales of 15,000 units, is $7,500,000. This places the value between $5,000,000 and $10,000,000. Option B is correct.

Step-by-step explanation:

The question revolves around determining the dollar value of ending inventory for Samuelson's production in January based on a level production plan. With 20,000 units produced each costing $500 to manufacture, and beginning inventory of 10,000 units, we can calculate the ending inventory after accounting for sales of 15,000 units in January. The calculation is as follows:

• Beginning Inventory + Units Produced = Total Available Units
• 10,000 units + 20,000 units = 30,000 units
• Total Available Units - Units Sold = Ending Inventory Units
• 30,000 units - 15,000 units = 15,000 units
• Ending Inventory Units x Cost per Unit = Dollar Value of Ending Inventory
• 15,000 units x $500/unit = $7,500,000

Therefore, the dollar value of the ending inventory for January is $7,500,000, which falls into option B: Between $5,000,000 and $10,000,000.