The anticipated unit sales for January are 5,000, sales for February are 4,000, and sales for March are 8,000

Business Feb 02, 2021

The anticipated unit sales for January are 5,000, sales for February are 4,000, and sales for March are 8,000. Finished goods are consistently maintained at 80% of the following month's sales. If units cost $10 each to produce, how much is February's total cost of production?

a) $0

b) $40,000

c) $72,000

d) $80,000

e) none of these

Expert Solution

February's total cost of production is calculated as follows:

	Units
Ending finished goods (8,000 * 80%)	6,400
Sale	4,000
Less: Begining finished goods (4,000 * 80%)	(3,200)
Total cost of production	7,200

Total cost of production in dollar amount = 7,200 * $10

= 72,000

So correct answer is an option (c) $72,000

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