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ACC 206 Week 2 Chapter 3 Problem 3 Manufacturing statements and cost behavior

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Chapter 3 Problem 3: Manufacturing statements and cost behavior 
Tampa Foundry began operations during the current year, manufacturing various products for industrial use. One such product is light-gauge aluminum, which the company sells for $36 per roll. Cost information for the year just ended follows.
             
            Per Unit          Variable Cost             Fixed Cost 
 
 
 
 
 
 
Direct materials 
Direct labor 
Factory overhead 
Selling 
$4.50 
6.50
9.00
— 
$ — 
— 
50,000
70,000
 
 
Administrative 
— 
135,000
 
 
Production and sales totaled 20,000 rolls and 17,000 rolls, respectively There is no work in process. Tampa carries its finished goods inventory at the average unit cost of production. 
 
Instructions:  
  1. a.       Determine the cost of the finished goods inventory of light-gauge aluminum. 
  2. b.      Prepare an income statement for the current year ended December 31. 
  3. c.       On the basis of the information presented: 
 
1)      Does it appear that the company pays commissions to its sales staff? Explain. 
2)      What is the likely effect on the $4.50 unit cost of direct materials if next year's production increases?
Why? 

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