Sedgwick Corporation Sold 12,500 Units of Its Single Product During

Essay

Sedgwick Corporation sold 12,500 units of its single product during the year, reporting a cost of goods sold that totaled $250,000. A review of the company's accounting records disclosed the following information. $\begin{array}{lr}\text { Cost of goods sold as a percentage }\\\text { of sales revenue } & 40 \% \\\text { Finished goods inventory - Jan 1 } & \$ 87,000 \\\text { Work in process - Dec 31 } & 55,000 \\\text { Cost of goods manufactured } & 241,000 \\\text { Raw materials used } & 40,000 \\\text { Direct labour } & 74,000 \\\text { Manufacturing overhead } & 122,000 \\\text { Selling \& administrative expenses } & 310,000\\\text { Sedgwick is subject to a } 30 \% \text { income tax rate. }\\\end{array}$ Required:
A. Determine the selling price per unit.
B. Management established a goal at the beginning of the year to reduce the company's investment in finished-goods inventory and work-in-process inventory.
1. Analyze cost of goods sold and determine if management's goal was achieved with respect to finished-goods inventory. Show computations.
2. Analyze the firm's manufacturing costs and determine if management's goal was achieved with respect to work-in-process inventory. Show computations.
C. Is the company profitable? Show calculations.