Question

Part A Instructions: Use the information provided below for Plant A of Big Noizz Corporation to prepare the Statement of Cost of Goods Manufactured, Cost of Goods Sold and Income Statement for 2017.

Sales $20,000

Raw Materials Used $5,000

Direct Labor Costs $2,000

Selling and Administrative Expenses $5,000

Beginning Raw Material Inventory $600

Ending Raw Material Inventory $2,000

Net Income $400

Beginning Work-in-Process Inventory zero

Ending Work-in-Process Inventory $600

Beginning Finished Goods Inventory $1,400

Ending Finished Goods Inventory $800

Answer 1

Big Noizz Corporation
Statement of Cost of Goods Manufactured
Direct Material Used
Beginning Raw Material Inventory	$    600
Add: Purchases of Raw Material Inventory	$ 6,400(note 1)
Less: Ending Raw Material Inventory	($2,000)
Direct material used		$ 5,000
Direct Labor Costs		$ 2,000
Manufacturing Overhead		$ 7,600(Note 4)
Total Manufacturing Cost		$ 14,600
Add: Beginning Work-in-process inventory		$         0
Less: Ending Work-in-process inventory		($   600)
Cost of Goods Manufactured		$ 14,000

Big Noizz Corporation
Statement of Cost of Goods Sold
Beginning Finished Goods Inventory	$   1,400
Add: Cost of Goods Manufactured(Note 3)	$ 14,000
Cost of Goods available for sale	$ 15,400
Less: Ending Finished Goods Inventory	($   800)
Cost of Goods Sold		$ 14,600

Big Noizz Corporation
Income Statement for the year ended 2017
Sales		$ 20,000
Cost of Goods Sold		($14600)
Gross Margin( Note 2)		$ 5,400
Operating Expenses
Selling and Administrative Expenses	($5000)
Operating Expense		($5,000)
Net Income		$ 400

Notes:

1. Raw Materials Purchases: Ending raw material+Used materials-Ending Raw material

                                            =$2000+$5000-$ 600=$6400

2. Gross Profit=Net Income +Selling & Administrative Expenses

                   =$ 400+$ 5000=$ 5,400

3. Cost of Goods Manufactured= Cost of Goods Sold+Ending Finished Goods Inventory- Beginning Finished Goods Inventory

=$ 14,600+$800-$1400=$ 14000

4. Manufacturing Overhead

Total Manufacturing cost= Cost of Goods Manufactured+ Ending Work-in-process inventory- Beginning Work-in-process inventory

            =$ 14,000+$ 600-$0= $ 14,600

Manufacturing overhead= Total Manufacturing cost-Direct materials-direct labour

=$ 14,600- $ 5000-$ 2000=$ 7,600