Question

Question # 1 — Cost of Goods Manufactured and Sold
Selected account balances of Knight Manufacturing Company appear below for 2017:

Beginning of Year End of Year
Finished Goods Inventory $32,000 $ 25,000
Work In Process Inventory 35,000 30,000
Raw Materials Inventory 26,000 46,000
Sales Revenue 360,000
Direct Labor 40,000
Factory Supervisory Salaries 18,000
Income Tax Expense 25,000
Factory Insurance 9,000
Raw Material Purchases 75,000
Administrative Expenses 17,000
Sales Returns and Allowances 15,000
Factory Depreciation 22,000
Indirect Labor 11,000
Selling Expenses 27,000

Instructions: Using the above information for Knight Manufacturing Company, answer the following questions. Support your answers with clearly identified computations.
1. What were the total overhead costs incurred?

2. What was the amount of direct materials used in production?

3. What was the cost of goods manufactured?

4. What was the cost of goods sold?

5. What was the amount of net income?

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Abdul-Rahim Taysir

Answer 1

1. Statement showing the total overhead costs incurred:

Overheads	$
Indirect Labor	$11,000
Income Tax Expense	$25,000
Administrative Expenses	$17,000
Selling Expenses	$27,000
Total overhead cost	$80,000

Manufacturing overhead cost:

Item	$
Factory Supervisory Salaries	$18,000
Factory Insurance	$9,000
Factory Depreciation	$22,000
Total manufacturing cost	$49,000

2. Calculation of the amount of direct materials used in production:

Item	$	$
Cost of Raw materials inventory:
Raw materials purchases	$75,000
Add: Raw materials at the beginning of the year	$26,000
Less: Raw materials at the end of the year	$46,000	$55,000

Direct materials used in the production = $55,000

3. Calculation of the amount of cost of goods manufactured:

Item	$	$
Direct materials :
Raw materials purchases	$75,000
Add: Raw materials at the beginning of the year	$26,000
Less: Raw materials at the end of the year	$46,000	$55,000
Direct Labor		$40,000
Manufacturing Overhead cost		$49,000
Total manufacturing cost		$144,000
Add: Beginning WIP inventory		$35,000
Less: Ending WIP inventory		$30,000
Cost of Goods manufacured for the Year		$149,000

4. Calculation of the amount of cost of goods sold:

Item	$	$
Direct materials :
Raw materials purchases	$75,000
Add: Raw materials at the beginning of the year	$26,000
Less: Raw materials at the end of the year	$46,000	$55,000
Direct Labor		$40,000
Manufacturing Overhead cost		$49,000
Total manufacturing cost		$144,000
Add: Beginning WIP inventory		$35,000
Less: Ending WIP inventory		$30,000
Cost of Goods manufacured for the Year		$149,000
Add: Beginning Finished good inventory		$32,000
Less: Ending Finished good inventory		$25,000
Cost of Goods Sold		$156,000

5. Calculation of the amount of net income:

Item	$	$
Net Sales Revenue:
Sales Revenue	$360,000
Less: Sales Returns and Allowances	$15,000	$345,000
Less: Cost of Goods Sold (Statement 4)		$156,000
Gross Profit		$189,000
Less: Overhead cost (Statement 1)		$80,000
Net income		$109,000