Question

You recently began an internship in the accounting department of Front Range Furniture. As your first assignment you were asked to perform a cost analysis and reporting for the year ended December 31, 2019.

Advertising expense $22,250                                       Direct labor $564,500

Depreciation expense – Office Equip $10,440            Income taxes expense $138,700

Depreciation expense – Selling Equip. $ 12,125          Indirect labor $61,000

Depreciation expense – Factory Equip. $37,400          Misc. Production costs $10,400

Factory supervision $123,400                                       Office salaries expense $ 72,875

Factory supplies used (indirect materials) $8,060         Raw Materials purchased $896,375

Factory utilities $39,500                                                 Rent expense- office $25,625

INVENTORIES:                                                              Rent expense- selling space $29,000

Raw Materials, Dec 31, 2018 $42,375                            Rent expense- factory building $95,500

Raw Materials, Dec 31, 2019 $72,430                            Maintenance expense- factory $32,375

Goods-in-Process, Dec 31, 2018 $14,500                      Sales $5,002,000

Goods-in-Process, Dec 31, 2019 $16,100                      Sales discounts $59,375

Finished Goods, Dec 31, 2018 $179,200                       Sales salaries expense $297,300

Finished Goods, Dec 31, 2019 $143,750

Prepare a Statement of Cost of Goods , Income Statement , Please use the T-Accounts provided in your working papers to demonstrate your understanding of cost flows, prepare a journal entries from the information in the table above and complete a cost classification chart.

Answer 1

Statement of Cost (Cost Sheet)

PartIculars Total Cost ( $ )

Opening Stock of Raw Materials 42,375

Add: Raw Materials Purchased 896,375

938,750

Less: Closing Stock of Raw Materials 72,430

Raw Materials Consumed 866,320   

Direct Labour 564,500

PRIME COST 1,430,820

Add: Factory / Work Overheads :

Depreciation Expenses Factory Equipment 37,400

Factory Supervision 1,23,400

Factory supplies used ( Indirect Materials ) 8,060

Factory Utilities 39,500

Indirect Labour 61,000

Miscellaneous Production Cost 10,400

Rent Expenses Factory building 95,500

Maintenance Expenses Factory 32,375

4,07,635

Add: Opening Goods in Process 14,500

4,22,135

Less: Closing Goods in Process 16,100 406,035

FACTORY COST 1,836,855

Add: Office & Administration Overhead:

Depreciation Office Equipment 10,440

Office Salaries Expenses 72,875

Rent Expenses Office 25,625

1,08,940

Add: Opening Finished Goods 1,79,200

2,88,140

Less: Closing Finished Goods 1,43,750 144,390

COST OF PRODUCTION 1,981,245

Add: Selling & Distribution Expenses :

Depreciation Selling Expenses 12,125

Advertising Expenses 22,250

Rent Expenses Selling Space 29,000

Sales Salary Expenses 297,300 360,675

COST OF SALES 2,341,920

Add: PROFIT ( BALANCING FIGURE ) 2,600,705

SALES (5,002,000 - 59,375 ) 4,942,625

Note: Income Tax Expenses do not form part of COST Sheet rather it is the part of Financial Accounting.