Karl's Keychain Company produces keychains that sell for $1 each. On January 1, 2015, the company had inventory of 8,000 keychains. During 2015, the company sold 900,000 keychains. At the end of the business year on December 31, 2015, the company's inventory of keychains was 9,000. What was the value of Karl's total production and inventory investment in 2015?
A) production = $901,000; inventory investment = $1,000
B) production = $900,000; inventory investment = $9,000
C) production =$899,000; inventory investment = $1,000
D) production = $891,000; inventory investment = $17,000

Question

Quizplus · Accepted Answer

The total production is calculated by adding the cost of goods sold (900,000 keychains at $1 each = $900,000) to the ending inventory ($9,000), and then subtracting the beginning inventory ($8,000). This gives us $901,000. The inventory investment is the difference between the ending and beginning inventory, which is $1,000 ($9,000 - $8,000).

Karl's Keychain Company Produces Keychains That Sell for $1 Each