Question

The following data appeared in Dolphin Corporation’s records on December 31 of last year:

Direct materials inventory, December 31 $50,000

Direct materials purchased during the year 200,000

Finished goods inventory, December 31 50,000

Indirect labor 20,000

Direct labor 250,000

Accounts payable 75,000

Factory heat, light and power 30,000

Building depreciation (70% is for manufacturing) 50,000

Administrative salaries 30,000

Accounts receivables 65,000

Miscellaneous factory cost 20,000

Net plant and equipment 200,000

Marketing costs 25,000

Maintenance on factory machines 10,000

Insurance (50% is for factory equipment) 10,000

Distribution costs to customers 15,000

Property taxes on manufacturing property8,000

Legal fees on customer complaints 10,000

Direct materials used 220,000

Cash 85,000

Work in process inventory, December 31 14,000

Dividends 100,000

On January 1, at the beginning of last year, the Finished Goods Inventory account had a balance of $55,000, and the Work in Process Inventory account had a balance of $18,000. Sales revenue during the year was $1,200,000. Required:

a) Determine the cost of goods manufactured.

b) Determine the cost of goods sold.

c) Determine the operating income (loss).

d) From the above list of accounts indicate one item that is an example of a(n): i. direct cost ii. indirect cost iii. product cost iv. period cost

Answer 1

a)	SCHEDULE OF COST OF GOODS MANUFACTURED
	Beginning WIP			18000
	Direct materials used:
	Beginning DM (Plug in figure)	70000
	Add: Purchase of DM	200000
	Total DM available	270000
	Less: Ending DM	50000
	Direct materials used		220000
	Direct labor		250000
	Manufacturing overhead:
	Indirect labor	20000
	Factory heat, light and power	30000
	Building depreciation (50000*70%)	35000
	Miscellaneous factory cost	20000
	Maintenance on factory machines	10000
	Insurance (10000*50%)	5000
	Property taxes on manufacturing property	8000
	Total factory overhead		128000
	Manufacturing costs incurred during the year			598000
	Total manufacturing costs			616000
	LESS: Ending WIP			14000
	Cost of goods manufactured			602000
b)	COST OF GOODS SOLD
	Beginning stock of finished goods	55000
	Add: Cost of goods manufactured	602000
	Total finished goods available for sale	657000
	Less: Ending stock of finished goods	50000
	Cost of goods sold	607000
c)	INCOME STATEMENT
	Sales Revenue		1200000
	Cost of goods sold		607000
	Gross profit		593000
	Operating costs:
	Building depreciation (50000*30%)	15000
	Administrative salaries	30000
	Marketing costs	25000
	Insurance (10000*50%)	5000
	Distirbution costs to customers	15000
	Legal fees on customer comlplaints	10000
	Total operating costs		100000
	Operating income		493000
d)	i) Direct cost - Direct material used
	ii) Indirect cost - Indirect labor
	ii) Product cost - Indirect labor
	iv) Period cost - Administrative salaries