A company has the following information for the current month of operations: $\begin{array}{lr}
\text { Raw materials used } & \$ 37,500 \
\text { Sales } \$ 97.50 \text { per unit) } & \$ 117,000 \
\text { Direct labor } & \$ 63,000 \
\text { Variable factory overhead } & \$ 25,500 \
\text { Fixed factory overhead } & \text { unknown } \
\text { Variable selling and administrative } & \$ 4,500 \
\text { Fixed selling and administrative } & \$ 7,500 \
\text { Gross profit } & \$ 45,000 \
\text { Contribution margin } & \text { unknown }\\
\text { Inventories: }&\text { Beginning}&\text { Ending }\
\text { Raw materials } & 0 & \$ 10,500 \
\text { WIP } & 0 & \text { none } \
\text { Finished goods } & 0 & 1,400\text { units }
\end{array}$ _____ units were produced during the period.
A)0
B)1,400
C)2,600
D)4,000

Question

Quizplus · Accepted Answer

The number of units produced can be calculated by understanding the cost structure and the sales information provided. The sales were $117,000 at $97.50 per unit, which means 1200 units were sold ($117,000 / $97.50 per unit = 1200 units). Since there were 1,400 units in ending finished goods inventory and none at the beginning, it implies that the company produced more than it sold. To find out exactly how many units were produced, we add the units sold (1200) to the units in ending inventory (1400) since there were no beginning inventories. This gives us a total of 2600 units produced during the period.

A Company Has the Following Information for the Current Month