Question

Question 1

Chaos Manufacturing had the following financial information for the year ended December 31 2018:

Inventory Balances:                Beginning                    Ending

Work in Progress                    $ 90,000                      $ 80,000

Finished Goods                        $ 77,000                      $ 67,000

Raw Materials                         $ 10,000                      $ 10,000

During the year, the budgeted and actual costs were as follows:

	Note	Budget	Actual
Raw Materials	1	300,000	290,000
Labour	2	540,000	518,000
Depreciation Factory Equipment		72,000	72,000
Depreciation Office Equipment		24,000	24,000
Building Rent	3	100,000	100,000
Maintenance – Factory Equipment		64,000	40,000
Utilities – Electrical	4	200,000	180,000
Utilities - Gas	5	100,000	90,000
Sales Commissions		40,000	30,000
Advertising		30,000	20,000
Shipping	6	20,000	16,000
Total		1,486,000	1,380,000

Sales for the year were $1,500,000

Note 1 – Raw material

For both budget and actual materials: 90% of raw materials are traced directly to specific jobs, and the remaining 10% of raw materials are used throughout the production process and not traced. $290,000 in materials was purchased in the year.

Note 2 – Labour

Budget: Direct Labour $300,000 + Factory Salaries $80,000 + Head Office Salaries $160,000 = $540,000

Actual: Direct Labour $270,000 + Factory Salaries $85,000 + Head Office Salaries $163,000 = $518,000

Note 3 – Building Rent

The building is shared between the factory and the administrative office. 68% of the building is related to the factory, and the remaining 32% is related to the administrative office.

Note 4 – Utilities Electrical

For both budget and actual, 90% of these costs are related to the factory, and 10% of these costs are related to the administrative office.

Note 5 – Utilities - Gas

All of the Gas is used to heat production equipment.

Note 6 – Shipping

All of the shipping costs are to ship finished goods to customers

Note 7 – Overhead

The manufacturer uses Normal Costing. Overhead is allocated based on Direct Labour costs. Any under/over applied overhead is allocated to Cost of Goods Sold.

Required:

Prepare an income statement. You may include a schedule of Cost of Goods Manufactured and Cost of Goods Sold as separate schedules or as part of the Income Statement.

Question 2

What is most likely a good cost driver (or drivers) for each of the following Cost Objects:

1. Large warehouse
2. University
3. Canada Post
4. OC Transpo

Answer 1

Post question2 separately, we are allowed to answer only one question in one screen

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Revenue from Sales				$   1,500,000
Finished Goods Inventory, Beginning			$         77,000
Cost of Goods Manufactured	Working-1		$       953,200
Cost of Finished goods available for sale			$   1,030,200
Less: Finished Goods Inventory, Ending			$       -67,000
Cost of Goods Sold-Unadjusted			$       963,200
Underapplied overheads	Working-2		$         21,800
Adjusted Cost of Goods Sold				$     -985,000
Gross Profit				$       515,000
Less: Administrative Expense	Working-3		$       213,000
Less: Selling Expense	Working-4		$         66,000
				$     -279,000
Net Income				$       236,000
1. Cost of Goods Manufactured Schedule:
Beginning work in process inventory				$         90,000
Direct Material Used:
Beginning Raw Material Inventory		$     10,000
Add: Purchases		$ 290,000
Raw Material Available		$ 300,000
Less: Ending Raw material		$ (10,000)
Raw Material Used		$ 290,000
Direct Material Used 90%			$       261,000
Direct Labor			$       270,000
Manufacturing overhead-Applied			$       412,200
Total Manufacturing Cost				$       943,200
Manufacturing Cost				$   1,033,200
Less: Ending work in process inventory				$       (80,000)
Cost of Goods manufactured				$       953,200
Working-2		Actual	Budget
Overheads:
Indirect Material	$290,000*10%	$     29,000	$         30,000
Indirect Labor		$     85,000	$         80,000
Building Rent	$100,000*68%	$     68,000	$         68,000
Utilities Electrical	$180,000*90%	$ 162,000	$       180,000	$200,000*90%
Utilities Gas		$     90,000	$       100,000
Total Overhreads		$ 434,000	$       458,000	a
Direct Labor Cost		$ 270,000	$       300,000	b
Predetermined Rate			152.67%	a/b
Applied Overheads	$270,000*152.67%	$ 412,200
Actual Overheads		$ 434,000
Under applied overheads		$     21,800
Working-3
Head office Salaries		$ 163,000
Building Rent	$100,000*32%	$     32,000
Utilities Electrical	$180,000*10%	$     18,000
		$ 213,000
Working-4
Sales Commission		$     30,000
Advertising		$     20,000
Shipping		$     16,000
		$     66,000