How should the $1,200,000 cost of raw materials that were thrown out be presented in the operating…


Question Description:

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In table, which shows Company X’s operating profit performance and summary of manufacturing activity for the year, it is assumed that there were no wasteful manufacturing costs. In this question, assume, instead, that the business had to throw away $1,200,000 of unusable raw materials. How should the $1,200,000 cost of raw materials that were thrown out be presented in the operating profit report and summary of manufacturing activity? Company X Per Unit Totals Operating Profit Report for Year Sales volume, in Units 110,000 Sales Revenue $1,400.00 $154,000,000 Cost of Goods Sold Expense (see below) -760 -83,600,000 Gross Margin $640.00 $70,400,000 Variable Operating Expenses -300 -33,000,000 Contribution Margin $340.00 $37,400,000 Fixed Operating Expenses -21,450,000 Operating Profit $15,950,000 Manufacturing Activity Summary for Year Per Unit Totals Annual Production Capacity, in Units 150,000 Actual Output, in Units 120,000 Raw Materials $215.00 $25,800,000 Direct Labor 125 15,000,000 Variable Manufacturing Overhead Costs 70 8,400,000 Total Variable Manufacturing Costs $410.00 $49,200,000 Fixed Manufacturing Overhead Costs 350 42,000,000 Product Cost and Total Manufacturing Costs $760.00 $91,200,000

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