Question

Beginning inventory at these costs on July 1 was 8,500 units. From July 1 to December 1, Convex produced 21,000 units. These units had a material cost of $10 per unit. The costs for labor and overhead were the same. Convex uses FIFO inventory accounting. a. Assuming that Convex sold 23,000 units during the last six months of the year at $20 each, what would gross profit be?

Answer 1

Gross profit = $187,500

Step-by-step explanation:

Note: the question is incomplete.

Assume, labour and other cost are $5 per unit and material cost is $5

Given:

Unit sold = 23,000 at $20 per unit

Stock in hand = 8,500 units

Produced units = 21,000 units

Computation of Gross profit:

FI-FO method

Gross profit = Sales - Cost of goods sold

Gross profit = (23,000 × $20) - [(8,500 × $10) + (12,500 × $15)]

Gross profit = 460,000 - [85,000 + 187,500]

Gross profit = 460,000 - 272,500

Gross profit = $187,500