Question

PULet you will find up at the top of the "tools" section on the Chapter 2 module zo right before this brain booster that walks you through Example #2-14! question 1 2 pts Lippy company manufactured 10,000 units in December with a total product cost of $22,902 They had zero finished goods inventory at the start of December. In December Zippy sold 7,476 units at a unit price of $6.88. Period expenses were $3,644. What is the amount of Zippy's gross profit (otherwise know as gross margin).?! Round any intermediate calculations to four decimal places. Not saved Submit Quiz

Answer 1

Solution

Zippy company manufactured 10000 units in December with a Total Product Cost of $22,902.

Therefore, Per unit cost = $22,902 / 10000 = $2.2902

They had zero finished goods inventory at the beginning of December.

Therefore, Opening Inventory = $0.00

During December, Zippy company sold 7476 units at a price of $6.88 per unit

Therefore, Sales Revenue = 7476 x $6.88 = $51434.88

As 10000 units were produced, and 7476 units were sold,

Closing Inventory (in units) = 10000 - 7476 = 2524

and, Inventory Value = 2524 X $2.2902 = $5780.4648

Therefore,

Gross Profit = Sales - (Opening Inventory of Finished Goods + Production during the period - Closing Inventory of Finished Goods)

Or, Gross Profit = 51434.88 - [0 + (10000 x 2.2902) - (2524 x 2.2902)]

Or, Gross Profit = 51434.88 - (0 + 22902 - 5780.4648)

Or, Gross Profit = 51434.88 - 17121.5352

Or, Gross Profit = 34313.3448

Answer: The Gross Profit of Zippy Company will be $34313.3448