Requirements 1 Show how to compute cost of goods manufacture

Requirements 1. Show how to compute cost of goods manufactured Use the following amounts direct materials used ($29,000), direct labour ($17,000), manufacturing overhead ($18,000), beginning work in process inventory ($10,000), and ending work in process inventory ($4.000) 2. Car-Canada spent $240 million in total to produce 40,000 cars this year. The $240 million breaks down as follows. The company spent $120 milion on foxed costs to run its manufacturing plants and $3,000 of variable costs to produce each car. Next year, it plans to produce 50,000 cars using the existing production facilities a. What is the current average cost per car this year? b Assuming there is no change in fixed costs or variable costs per unit what is the total forecasted cost to produce 50,000 cars next year? c What is the forecasted average cost per car next year? d Why does the average cost per car vary between years? 17.000 18,000 74,000 4,000 S7D,000 Direct labour Manufacturing overhead Total manufacturing costs to account for Less. Ending work in process inventory Cost of goods manufactured (CGM) Requirement 2a. What is the current average cost per car this year? Determine the formula, and then calculate the current average cost per unit (Enter your answer to the nearest dollar) Current average cost = cars milion

Solution

2a Total cost ÷ Number of units = Current average cost $240 million ÷ 40,000 cars = $6,000 per car b Total fixed costs + Total variable costs = Total projected costs $120 million + (50,000 cars*$3,000 per car) = $270 million c Total cost ÷ Number of units = Projected average cost $270 million ÷ 50,000 cars = $5,400 per car d As the fixed cost per car decreases with increases in production,the average cost per unit will decrease