Question

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Alexandria Aluminum Company, a manufacturer of recyclable soda cans, had the following inventory balances at the beginning and end of 20x1.

Inventory Classification	January 1, 20x1				December 31, 20x1
Raw material	$	60,000			$	70,000
Work in process		120,000				115,000
Finished goods		150,000				165,000

During 20x1, the company purchased $250,000 of raw material and spent $400,000 on direct labor. Manufacturing overhead costs were as follows:

Indirect material	$	8,000
Indirect labor		26,000
Depreciation on plant and equipment		100,000
Utilities		26,000
Other		30,000

Sales revenue was $1,112,000 for the year. Selling and administrative expenses for the year amounted to $110,000. The firm’s tax rate is 40 percent.

QUESTIONS!!

2. Prepare a schedule of cost of goods sold

ALEXANDRIA ALUMINUM COMPANY

Schedule of Cost of Goods Sold

For the Year Ended December 31, 20x1

Finished-goods inventory, January 1 ???

Add: Cost of goods manufactured ???

Cost of goods available for sale ???

Less: Finished-goods inventory, December 31 ???

Cost of goods sold ???

Prepare Income statement

	ALEXANDRIA ALUMINUM COMPANY Income Statement For the Year Ended December 31, 20x1 Sales revenue ??? Less: Cost of goods sold ??? Gross margin ??? Selling and administrative expenses ??? Income before taxes ??? Income tax expense ??? Net income $ ???

Answer 1

• Note

Schedule of Cost of Goods Manufactured
Direct materials:
Beginning raw material inventory	$60,000
Add: Purchase of raw material	$250,000
Total raw materials available	$310,000
Less: Ending raw material inventory	$70,000
Raw material used in production		$240,000
Direct labor cost		$400,000
Manufacturing Overhead:
Indirect Labor	$26,000
Indirect material	$8,000
Depreciation Plant Equipment	$100,000
Utilities & Other	$56,000	$190,000
Total manufacturing costs		$830,000
Add: Beginning WIP Inventory		$120,000
Total cost of Work in Process		$950,000
Less: Ending WIP Inventory		$115,000
Cost of Goods manufactured		$835,000

• [2]

Schedule of Cost of Goods Sold
Finished goods Jan 1	$150,000
Add: Cost of Goods manufactured	$835,000
Cost of Goods available for sale	$985,000
Less: Finished goods Dec 31	$165,000
Cost of Goods Sold	$820,000

• Income Statement

ALEXANDRIA ALUMINUM COMPANY
Income Statement
For the Year Ended December 31, 20x1
Sales revenue	$1,112,000
Less: Cost of goods sold	$820,000
Gross margin	$292,000
Selling and administrative expenses	$110,000
Income before taxes	$182,000
Income tax expense	$72,800
Net income	$109,200