Troski Corporation sells a number of products to groups that provide educational workshops and seminars. One of the products involves a combination leather case and note pad. The company purchases the case and pad combination from a supplier and encloses a $3 pen that contains the educational groups' name and logo.Troski began to carry this product at the start of 20x3, acquiring 12,500 cases from Executive Supply for $87,500 along with an identical number of pens from Accent Goods. During 20x3, 9,500 of the cases and pens were issued to Troski's assembly operation where the pen is added. Eighty percent of these cases were completed as of December 31, and a review of the December 31 finished-goods inventory found 2,600 completed cases in the warehouse. Conversations with salespeople

Question

revealed that 70 finished sets were used in various company marketing activities throughout the year.Required: A. Determine the cost of the cases and pens that would appear in Troski's raw materials, work in process, and finished-goods inventory as of December 31.B. Determine the cost of the cases and pens that would appear in the company's cost of goods sold for 20x3.

What will be an ideal response?

Answer 1

A. Cost per case and pad: $87,500 ÷ 12,500 units = $7 per unit
Cost per pen: $3 (given)
Cost per case, pad, and pen: $7 + $3 = $10
Raw materials: (12,500 units - 9,500 units issued to assembly) × $10 = $30,000
Work in process: (9,500 units - (9,500 × 80%) = 1,900 units; 1,900 units × $10 = $19,000
Finished goods: 2,600 units × $10 = $26,000
B. Troski completed 7,600 units (9,500 units × 80%) during 20x3. Since 2,600 units were found in finished-goods inventory, the company disposed of 5,000 completed sets (7,600 - 2,600) throughout the year. Seventy of these sets were used in marketing activities; thus, 4,930 (5,000 - 70) were sold, resulting in a cost of goods sold of $49,300 (4,930 units × $10).