Question

Use the following information for the Exercises below.

The following selected account balances are provided for Delray Mfg.

Sales	$	1,295,000
Raw materials inventory, Dec. 31, 2016		38,000
Work in process inventory, Dec. 31, 2016		55,800
Finished goods inventory, Dec. 31, 2016		62,900
Raw materials purchases		186,200
Direct labor		228,000
Factory computer supplies used		22,200
Indirect labor		49,000
Repairs—Factory equipment		5,250
Rent cost of factory building		59,000
Advertising expense		106,000
General and administrative expenses		134,000
Raw materials inventory, Dec. 31, 2017		41,400
Work in process inventory, Dec. 31, 2017		39,500
Finished goods inventory, Dec. 31, 2017		69,800

Exercise 14-13 Preparation of schedule of cost of goods manufactured LO P2

Prepare its schedule of cost of goods manufactured for the year ended December 31, 2017.

Exercise 14-14 Income statement preparation LO P2

Prepare an income statement for Delray Mfg. (a manufacturer).

Answer 1

Working as follows:

Schedule of cost of goods manufactured
Direct materials:
Beginning raw material	$38,000
Add: Raw material purchased	$186,200
Raw material available for use	$224,200
Less: Ending Raw material	($41,400)
Direct materials used		$182,800
Direct Labor		$228,000
Add: Factory overhead:
Factory computer supplies used	$22,200
Indirect labor	$49,000
Repairs of factory equipment	$5,250
Rent cost of factory building	$59,000
Total factory overhead costs		$135,450
Total manufacturing cost		$546,250
Add: Beginning WIP		$55,800
Total Cost of WIP		$602,050
Less: Ending WIP		($39,500)
Cost of goods manufactured		$562,550

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Calculation of cost of goods sold
Beginning finished goods inventory	$62,900
Add: Cost of goods manufactured	$562,550
Cost of goods available for sale	$625,450
Less: Ending finished goods inventory	($69,800)
Cost of goods sold	$555,650

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Income Statement
Sales		$1,295,000
Less: COGS		($555,650)
Gross profit		$739,350
Less: Operating expenses
Advertising expenses	$106,000
General and administrative expenses	$134,000
Total operating expenses		$240,000
Operating Income		$499,350