Answered: Jax Incorporated reports the following…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter5: Inventories And Cost Of Goods Sold

Section: Chapter Questions

Problem 5.23MCE

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Question

Jax Incorporated reports the following data for its only product. The company had no beginning finished goods inventory and it uses absorption costing.

Sales price	$ 56.20	per unit
Direct materials	$ 9.20	per unit
Direct labor	$ 6.70	per unit
Variable overhead	$ 11.20	per unit
Fixed overhead	$ 781,200	per year

1. Compute gross profit assuming (a) 62,000 units are produced and 62,000 units are sold and (b) 84,000 units are produced and 62,000 units are sold.
2. By how much would the company’s gross profit increase or decrease from producing 22,000 more units than it sells?

Required 1 Required 2
By how much would the company's gross profit increase or decrease from producing 22,000 more units than it sells?
Gross profit
increases
by

Compute gross profit assuming (a) 62,000 units are produced and 62,000 units are sold and (b) 84,000 units are produced
and 62,000 units are sold.
Sales
Cost of goods sold
Gross profit
(a) 62,000 Units
Produced and 62,000
Units Sold
$
3,484,400
(b) 84,000 Units
Produced and 62,000
Units Sold
$
3,484,400

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