In: Accounting
Manufacturing Income Statement, Statement of Cost of Goods Manufactured
Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:
On
CompanyOff
Company
Materials inventory, December 1$75,080 $96,850
Materials inventory, December 31(a) 109,440
Materials purchased190,700 (a)
Cost of direct materials used in production201,210 (b)
Direct labor283,050 217,910
Factory overhead87,840 108,470
Total manufacturing costs incurred in December(b) 626,620
Total manufacturing costs716,250 716,250
Work in process inventory, December 1144,150 233,410
Work in process inventory, December 31121,630 (c)
Cost of goods manufactured(c) 620,810
Finished goods inventory, December 1126,890 108,470
Finished goods inventory, December 31132,890 (d)
Sales1,106,680 968,500
Cost of goods sold(d) 626,620
Gross profit(e) (e)
Operating expenses144,150 (f)
Net income(f) 215,010
Required:
1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.
LetterOn CompanyOff Company
a.$$
b.$$
c.$$
d.$$
e.$$
f.$$
Feedback
1.
a. The cost of direct materials used in production includes the beginning materials inventory plus purchases, less the ending materials inventory.
b. Total manufacturing costs incurred during December include direct materials, direct labor, and factory overhead.
c. The cost of goods manufactured is beginning work in process plus total manufacturing costs less the ending work in process.
d. The cost of goods sold is the beginning finished goods plus the cost of goods manufactured, less the ending finished goods.
e. Sales minus cost of goods sold equals gross profit.
f. Gross profit minus operating expenses equals net income.
Use similar relationships from On Company to find the missing amounts for the Off Company items (a) through (f).
2. Prepare On Company's statement of cost of goods manufactured for December.
On Company
Statement of Cost of Goods Manufactured
For the Month Ended December 31
Work in process inventory, December 1 $
Direct materials:
Materials inventory, December 1 $
Purchases
Cost of materials available for use $
Materials inventory, December 31
Cost of direct materials used in production $
Direct labor
Factory overhead
Total manufacturing costs incurred during December
Total manufacturing costs$
Work in process inventory, December 31
Cost of goods manufactured $
Feedback
2. The cost of goods manufactured is the beginning work in process plus the cost of direct materials used in production plus direct labor and factory overhead, less the ending work in process.
3. Prepare On Company's income statement for December.
On Company
Income Statement
For the Month Ended December 31
Sales $
Cost of goods sold:
Finished goods inventory, December 1 $
Cost of goods manufactured
Cost of finished goods available for sale $
Finished goods inventory, December 31
Cost of goods sold
Gross profit $
Operating expenses
Net income $
1.
On Company
(a) Materials inventory, December 31 = 75080+190700-201210 =
$64570
(b) Total manufacturing costs incurred in December =
$201210+283050+87840 = $572100
(c) Cost of goods manufactured = $572100+144150 - 121630 =
$594620
(d) Cost of goods sold = $594620 + 126890 - 132890 = $588620
(e) Gross Profit = $1106680 - 588620 = $518060
(f) Net Income = $518060 - 144150 = $373910
Off Company
(a) Material Purchased = $300240+109440-96850 = $312830
(b) Cost of Direct Material used = $626620 - 108470 - 217910 =
$300240
(c) Work in process inventory, December 31 = $626620+233410-620810
= $239220
(d) Finished goods inventory, December 31 = $620810+108470-626620 =
$102660
(e) Gross Profit = $968500-626620 = $341880
(f) Operating Expenses = $341880 - 215010 = $126870
2.
Schedule of Cost of Goods manufactured | ||
Direct Materials | ||
Raw Material, Beginning Inventory | $ 75,080 | |
Add: Purchases | $ 190,700 | |
Total Raw Material Available | $ 265,780 | |
Deduct : Raw Material in inventory, ending | $ 64,570 | |
Raw Material used in production | $ 201,210 | |
Direct Labor | $ 283,050 | |
Manufacturing Overhead | $ 87,840 | |
Total Manufacturing Costs | $ 572,100 | |
Add: Beginning Work in Process Inventory | $ 144,150 | |
$ 716,250 | ||
Deduct: Ending Work in Process Inventory | $ 121,630 | |
Cost of Goods Manufactured | $ 594,620 |
3.
Income Statement | ||
Sales Revenue | $ 1,106,680 | |
Cost of Goods Sold | ||
Finished Goods Inventory, Beginning | $ 126,890 | |
Add: Cost of Goods Manufactured | $ 594,620 | |
Cost of Goods Available for sale | $ 721,510 | |
Deduct : Finished Goods Inventory, Ending | $ 132,890 | |
Cost of goods sold | $ 588,620 | |
Gross Profit | $ 518,060 | |
Operating Expenses | $ 144,150 | |
Net Income | $ 373,910 |