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Convex Mechanical Supplies produces a product with the following costs as of July 1, 20X1: Material $6 Labor 4 Overhead 3 $13 Beginning inventory at these costs on July 1 was 12,100 units. From July 1 to December 1, Convex produced 27,000 units. These units had a material cost of $10 per unit. The costs for labor and overhead were the same. Convex uses FIFO inventory accounting. a. Assuming that Convex sold 29,000 units during the last six months of the year at $20 each, what would gross profit be?

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Answer:

Gross profit= $135,400

Explanation:

Giving the following information:

12,100 units:

Material $6

Labor $4

Overhead $3

Total $13

27,00 units:

Material $10

Labor $4

Overhead $3

Total $17

Convex sold 29,000 units during the last six months of the year at $20 each.

First, we need to calculate the cost of goods sold. Under the FIFO (first-in, first-out) method, the COGS is calculated using the cost of the first units sold.

COGS= 12,100*13 + 16,900*17= $444,600

Now, the gross profit:

Gross profit= 29,000*20 - 444,600

Gross profit= $135,400

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