Question

Problem 14-5A (Part Level Submission) Empire Company is a manufacturer of smart phones. Its controller resigned in October 2017. An inexperienced assistant accountant has prepared the following income statement for the month of October 2017. EMPIRE COMPANY Income Statement For the Month Ended October 31, 2017 Sales revenue $ 780,000 Less: Operating expenses Raw materials purchases $ 264,000 Direct labor cost 190,000 Advertising expense 90,000 Selling and administrative salaries 75,000 Rent on factory facilities 60,000 Depreciation on sales equipment 45,000 Depreciation on factory equipment 31,000 Indirect labor cost 28,000 Utilities expense 12,000 Insurance expense 8,000 803,000 Net loss $( 23,000 ) Prior to October 2017, the company had been profitable every month. The company’s president is concerned about the accuracy of the income statement. As her friend, you have been asked to review the income statement and make necessary corrections. After examining other manufacturing cost data, you have acquired additional information as follows. 1. Inventory balances at the beginning and end of October were: October 1 October 31 Raw materials $ 18,000 $ 29,000 Work in process 20,000 14,000 Finished goods 30,000 50,000 2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory operations. The remaining amounts should be charged to selling and administrative activities. Collapse question part (a) Prepare a schedule of cost of goods manufactured for October 2017. (Round answers to 0 decimal places, e.g. 125.) EMPIRE COMPANY Cost of Goods Manufactured Schedule $ $ : $ : $

Answer 1

Solution - Schedule of cost of goods manufactured

Empire Company

Cost of goods manufactured schedule

For the month ended october, 2017

Particulars			Amount
Work in process on october 1			$20000
Direct Material
Raw Material beginning inventory on october 1	$18000
Raw Material Purchases	$264000
Total Raw material available for use	$282000
Less : Raw Material ending inventory october 31	$29000
Direct Material Used (A)		$253000
Direct labour (B)		$190000
Manufacturing Overhead
Factory facilities rent	$60000
Depreciation on factory equipment	$31000
Indirect labour cost	$28000
Utilities expenses ($12000*75%)	$9000
Insurance expenses ($8000*60%)	$4800
Total Manufacturing overhead (C)		$132800
Total Manufacturing cost (A+B+C)			$575800
Total Cost of work in process ($575800+20000)			$595800
Less : Ending work in process on october 31			$14000
Cost of goods manufactured			$581800