RST Corporation produces 70,000 cell phones per year. The company estimates its direct material costs for the cell phone to be $400 per unit and its conversion costs (direct labor plus support) to be $500 per unit. Annual inventory carrying costs, not included in these costs are estimated to be 10%. 14. RST's average inventory levels are estimated as follows: Direct material Work in process (100% complete for materials and (50% complete for conversion) Finished goods 2 months of production 2 months of production 1 month of production What is RST's annual inventory carrying costs? A) $1,500,000 B) $1,650,000 C) $1,750,000 D) $2,000,000

RST Corporation produces 70,000 cell phones per year. The company estimates its direct material costs for the cell phone to be $400 per unit and its conversion costs (direct labor plus support) to be $500 per unit. Annual inventory carrying costs, not included in these costs are estimated to be 10%. 14. RST's average inventory levels are estimated as follows: Direct material Work in process (100% complete for materials and (50% complete for conversion) Finished goods 2 months of production 2 months of production 1 month of production What is RST's annual inventory carrying costs? A) $1,500,000 B) $1,650,000 C) $1,750,000 D) $2,000,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

RST Corporation produces 70,000 cell phones per year. The company estimates its direct
material costs for the cell phone to be $400 per unit and its conversion costs (direct labor plus
support) to be $500 per unit. Annual inventory carrying costs, not included in these costs are
estimated to be 10%.
14.
RST's average inventory levels are estimated as follows:
Direct material
Work in process
(100% complete for materials and
(50% complete for conversion)
Finished goods
2 months of production
2 months of production
1 month of production
What is RST's annual inventory carrying costs?
A) $1,500,000
B) $1,650,000
C) $1,750,000
D) $2,000,000

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