Grand Yachts manufactures sailboats. Due to recessionary conditions which have significantly depressed sales, the company had to cut back production to levels significantly below the normal level of 500 units a year. In 2011, the company’s production resulted in the following amounts:
ItemAmount
Number of boats
Opening inventory…………………………………………………………40
Production………………………………………………………………..320
Sales………………………………………………………… …………(280)
Ending inventory………………………………………………………….80
Standard costs per unit based on SOU units per year
Raw materials…………………………………………………S 18,000/unit
Production wages……………………………………………….37,000/unit
Variable production overhead…………………………………..15,000/unit
Fixed production overhead…………………………………….20,000Ainit
Total production cost…………………………………………S 90,000/unit
Opening inventory cost………………………………………...S 3,600,000
Sales……………………………………………………………542,000,000
Actual amounts of variable and fixed costs were not materially different from standard costs.
Required:
Determine the amount of cost that should be included in inventories and the gross profit for the year. Grand Yachts uses the first-in, first-out cost flow assumption.