Marcye Co. manufactures office furniture. During the most productive month of th
ID: 2361443 • Letter: M
Question
Marcye Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are: a. $17,600b. $56,000
c. $28,400
d. cannot be determined from the data given Marcye Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are: a. $17,600
b. $56,000
c. $28,400
d. cannot be determined from the data given
Explanation / Answer
Marcye Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are: $28,400 FIFO, which stands for "first-in-first-out," is an inventory costing method which assumes that the first items placed in inventory are the first sold. Thus, the inventory at the end of a year consists of the goods most recently placed in inventory. FIFO is one method used to determine Cost of Goods Sold for a business . Here is how inventory cost is calculated using the FIFO method: Assume a product is made in three batches during the year. The costs and quantity of each batch are: Batch 1: Quantity 2,000 pieces, Cost to produce $8000 Batch 2: Quantity 1500 pieces, Cost to produce $7000 Batch 3: Quantity 1700 pieces, Cost to produce $7700 Let's say you sold 4000 units during the year, out of the 5200 produced. Then calculate the unit costs for each batch: Batch 1: 8000/2000 = 4 Batch 2: 7000/1500 = 4.667 Batch 3: 7700/1700 = 4.529 So, of the 4000 units sold, using FIFO The first 2000 units sold from the first batch cost $4 per unit. The next 1500 units sold from the second batch cost $4.667 per unit. And the last 500 units sold from the third batch cost $4.529. The cost of the remaining 1200 units from the third batch is $4.529. These units will start off the second year.