Question

Financial Statement Elements: Manufacturer The following selected information was extracted from the 20x1 accounting records of Lone Oak Products: Raw material purchases $175,000 Direct labor 254,000 Indirect labor 109,000 Selling and administrative salaries 133,000 Building depreciation 80,000 Other selling and administrative expenses 195,000 Other factory costs 344,000 sales revenue ($130perunil) 1,495,000 *Seventy five percent of the company's building was devoted to production activities; the remaining 25 percent was used for selling and administrative functions. Inventory data: January1 December 31 Raw material $ 15,800 $18,200 Work in process 35,700 62,100 Finished goods* 111 ,1 00 97,900 *The January 1andOecember 31finished-goodsinventoryconsistedof 1,350 units and 1,190 units. respectively. Required: 1. Calculate Lone Oak's manufacturing overhead for the year. 2. Calculate. Lone Oak's cost of goods manufactured. 3. Compute the company's cost of goods sold. 4. Determine net income for 20x1, assuming a 30% income tax rate. 5. Determine the number of completed units manufactured during the year. 6. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements. Show how the solution will change if the following data change; indirect labor is $115,000 and other factory costs amount to $516,000. (please show work on excel)

Answer 1

SOLUTION:

1) Lone Oak's manufacturing overhead

Indirect labor	$109,000
Building depreciation	$60,000
Other factory costs	$344,000
Total	$513,000

　

2) Lone Oak's cost of goods manufactured

Direct material:
Raw material inventory as on Jan-1	$15,800
Plus: Purchases of raw material	$175,000
Raw material available for use	$190,800
Minus: Raw-material inventory Dec-31	$18,200
Raw material used		$172,600
Direct labor		$254,000
Manufacturing overhead		$513,000
Total manufacturing costs		$939,600
Plus: Work-in-process inventory as on Jan- 1		$35,700
Subtotal		$975,300
Minus: Work-in-process inventory as on Dec-31		$62,100
Cost of goods sold		$913,200

　

3) cost of goods sold.

Finished-goods inventory, Jan. 1	$111,100
Plus: Cost of goods manufactured	$913,200
Cost of goods available for sale	$1,024,300
Minus: Finished-goods inventory, Dec-31	$97,900
Cost of goods sold	$926,400

　

4) Net income for 20x1, assuming a 30% income tax rate

Sales revenue		$1,495,000
Minus: Cost of goods sold		$926,400
Gross Margin		$568,600
Selling and administrative expenses:
Salaries	$133,000
Building depreciation	$20,000
Other	$195,000	$348,000
Income before taxes		$220,600
Income tax expense		$66,180
Net income		$154,420