Question

Carlton Manufacturing Company provided the following details about operations in February:

Purchases of raw materials	$	166,000
Maintenance, factory		40,600
Direct labour		34,900
Depreciation, factory equipment		59,800
Indirect materials, factory		3,600
Selling and administrative salaries		46,100
Utilities, factory		28,400
Sales commissions		18,700
Insurance, factory equipment		4,600
Depreciation, sales equipment		22,400
Advertising expenses		113,500
Rent, factory building		?

The company also provided details regarding the balances in the inventory accounts at the beginning and end of the month as follows:

	Beginning of Month		End of Month
Raw materials	$	37,000		?
Work in process		28,800		?
Finished goods		21,000		?

Raw materials used in production cost $177,480, total overhead costs for the year were $207,440, the goods available for sale totalled $408,000, and the cost of goods sold totalled $353,500.

Required:

1-a.	Prepare a schedule of cost of goods manufactured of the company’s income statement for the year.

          

1-b.	Prepare a schedule cost of goods sold section of the company’s income statement for the year.

          

2.	Assume that the dollar amounts given above are for the equivalent of 17,400 units produced during the year. Compute the average cost per unit for direct materials used, and compute the average cost per unit for rent on the factory building. (Round your answers to 2 decimal places.)

          

3.	Assume that in the following year the company expects to produce 22,400 units. What average cost per unit and total cost would you expect to be incurred for direct materials, and for rent on the factory building? Direct materials are a variable cost and rent is a fixed cost. (Round "Unit cost" answers to 2 decimal places.)

          

Answer 1

Answer 1-a.
Statement of Cost of Goods Manufactured
Direct Material
Raw Material Inventory, Beginning	37,000.00
Material Purchased	166,000.00
Total Direct Material Available for Prouction	203,000.00
Raw Material Inventory, Ending ($203,000 - $177,480)	(25,520.00)
Cost of Direct Materials Used in Productions		177,480.00
Direct Labor		34,900.00
Factory Overhead
Maintenance, Factory	40,600.00
Depreciation, Factory Equipment	59,800.00
Indirect Materials, Factory	3,600.00
Utilities Factory	28,400.00
Insurance, Factory Equipment	4,600.00
Rent, Factory Building - $207,440 - $137,000	70,440.00
Total Factory Overheads		207,440.00
Total Manufacturing Costs		419,820.00
Add: WIP Inventory, Beginning		28,800.00
Sub-total		448,620.00
Less: WIP Inventory, Ending - $448,620 - $387,000		(61,620.00)
Cost of Goods Manufactured		387,000.00
Answer 1-b.
Statement of Cost of Goods Sold
Finished Goods Inventory, Beginning	21,000.00
Cost of Goods Manufactured - $408,000 - $21,000	387,000.00
Cost of Goods Available for Sale	408,000.00
Less: Finished Goods Inventory, Ending - $408,000 - $353,500	(54,500.00)
Cost of Goods Sold	353,500.00
Answer 2.
Average Cost per unit of Direct Materials = $177,480 (Total Direct Material) / 17,400 Units
Average Cost per unit of Direct Materials = $10.20 per unit
Average Cost per Unit - Rent, Factory Building = $70,440 (Factory Rent) / 17,400 Units
Average Cost per Unit - Rent, Factory Building = $4.05 per unit (approx.)
Answer 3.
Average Cost per unit of Direct Materials = $10.20 per unit
Total Cost - Direct Materials = $10.20 X 22,400 Units
Total Cost - Direct Materials = $228,480
Average Cost per Unit - Rent, Factory Building = $70,440 (Factory Rent) / 22,400 Units
Average Cost per Unit - Rent, Factory Building = $3.14 per unit