Question

Koufax Materials Corporation produces plastic products for home appliances and electronics. The financial department has produced the following information for the year ended December 31.

Administrative salaries	$	2,645,000
Depreciation on the administrative building		1,162,000
Depreciation on the manufacturing plant		1,770,000
Direct labor		4,712,500
Direct materials inventory, January 1		1,089,200
Direct materials inventory, December 31		1,255,000
Direct materials purchased during the year		8,976,000
Distribution costs		677,000
Finished goods inventory, January 1		1,662,000
Finished goods inventory, December 31		1,389,500
Indirect labor		562,000
Insurance (on manufacturing plant)		73,200
Legal fees		516,300
Maintenance (on the manufacturing plant)		235,400
Manufacturing plant utiities		804,100
Marketing costs		769,250
Other manufacturing plant costs		650,880
Sales revenue		22,674,920
Taxes (on manufacturing plant and property)		235,600
Work-in-process inventory, January 1		423,250
Work-in-process inventory, December 31		416,700

Required:

a. Prepare a cost of goods manufactured and sold statement.

b. Prepare an income statement.

repare a cost of goods manufactured and sold statement.

	KOUFAX MATERIALS CORP. Cost of Goods Manufactured and Sold Statement For the Year Ending December 31 Manufacturing costs: Direct materials: Manufacturing overhead: Total overhead Total manufacturing costs Total cost of work-in-process during the year Costs of goods manufactured this year Cost of goods available for sale Cost of goods sold (to income statement)

Prepare an income statement. (Loss amounts should be indicated with a minus sign.)

	KOUFAX MATERIALS CORP. Income Statement For the Year Ending December 31 Total operating costs

Required:

a. Prepare a cost of goods manufactured and sold statement.

b. Prepare an income statement.

Answer 1

Ans. A

KOUFAX MATERIALS CORPORATION

Cost of Goods Manufactured & Sold Statement

For the Year Ended December 31

Particulars	Amount	Amount
Beginning Work in process inventory		$423,250
Manufacturing Costs:
Direct materials:
Beginning raw materials inventory	$1,089,200
Add: Purchase of direct materials	$8,976,000
Raw materials available	$10,065,200
Less: Ending raw materials inventory	-$1,255,000
Direct materials used (A)		$8,810,200
Direct labor (B)		$4,712,500
Manufacturing overhead:
Depreciation on the manufacturing plant	$1,770,000
Indirect labor	$562,000
Insurance on manufacturing plant	$73,200
Maintenance on the manufacturing plant	$235,400
Manufacturing plant utilities	$804,100
Other manufacturing plant costs	$650,880
Taxes on manufacturing palnt and property	$235,600
Total Overhead ©		$4,331,180
Total manufacturing costs   (A + B + C)		$17,853,880
Total cost of work in process		$18,277,130
Less: Ending Work in process inventory		-$416,700
Cost of goods manufactured		$17,860,430
Add: Beginning finished goods inventory		$1,662,000
Cost of goods available for sale		$19,522,430
Less: Ending finished goods inventory		-$1,389,500
Cost of goods sold		$18,132,930

*Manufacturing overhead includes only indirect expenses which are related to manufacturing process.

* Total cost of work in process = Beginning work in process + Total manufacturing costs.

Ans. B

KOUFAX MATERIALS CORPORATION

Income Statement

For the Year Ended December 31

Particulars	Amount	Amount
Sales revenue		$22,674,920
Less: Cost of goods sold		$18,132,930
Gross profit (a)		$4,541,990
Less: Operating expenses:
Administrative salaries	$2,645,000
Depreciation on the administrative building	$1,162,000
Distribution costs	$677,000
Legal fees	$516,300
Marketing costs	$769,250
Total Operating Costs (b)		$5,769,550
Net Operating Loss (a - b)		-$1,227,560

*The expenses that are not related to manufacturing process or related to selling, administration, office

and distribution are considered as operating expenses.

*These operating expenses are listed in the Income statement.