Question

A company sells each unit of its product for $90. The final department showed the following costs per equivalent unit: $40 transferred-in, $21 direct materials, 13$ conversion. What is the gross profit on each unit sold by the company?

a. $90
b.$16
c.$74
d.$56

Answer 1

The gross profit on each unit sold by the company is calculated by subtracting the total costs per unit from the selling price per unit ($90), which results in a gross profit of $16 per unit.

Step-by-step explanation:

The question asks to calculate the gross profit on each unit sold by a company that prices its product at $90 per unit. The cost breakdown per equivalent unit provided by the final department includes $40 transferred-in, $21 for direct materials, and $13 for conversion costs. To find the gross profit, you would subtract the sum of these costs from the selling price:

Selling Price per Unit: $90
Transferred-In Costs: $40
Direct Materials: $21
Conversion Costs: $13

Total Costs per Unit = Transferred-In + Direct Materials + Conversion Costs
Total Costs per Unit = $40 + $21 + $13 = $74

Gross Profit per Unit = Selling Price per Unit - Total Costs per Unit
Gross Profit per Unit = $90 - $74 = $16