Question

list of account balances for Nicholas Corporation follow: Revenue and Expenses January 1 inventories Purchases of raw materials $140,000 Raw materials $45,000 Direct labor $225,000 Work in process $30,000 Indirect labor $40,000 Finished Goods $105,000 Rent - factory $84,000 Depreciation - machinery $35,000 Insurance - factory $18,000 December 31 inventories Salesperson's salaries $72,000 Raw materials $40,000 Maintenance - machinery $12,000 Work in process $35,000 Administrative salaries $50,000 Finished goods $110,000 Miscellaneous - factory $26,000 Miscellaneous - office $40,000 Sales revenues $850,000 To answer questions 6 and 7 you will need to prepare an income statement. To get the problems correct you will need to determine the Cost of Goods manufactured and the Cost of Goods Sold. To this requires an understanding of the difference between product and period costs. Choose the best answer below for your determination of the cost of goods sold

Answer 1

Cost of Goods manufactured:
Beginning inventory of WIP					30000
Current cost of manufacture
Raw material beginning balance			45000
Add: Purchase			140000
Total cost of Raw material			185000
Less: Ending ivnentory of RM			-40000
Direct material consumed				145000
Direct labour				225000
Manufactuing overheads
Indirect labour			40000
factory rent			84000
Depreciation			35000
Insurance			18000
Maintenance-machinery			12000
Misc-Factory			26000
Total Manufacturing overheads				215000
Total manufacturing cost					585000
Total Work in process cost					615000
Less: Ending Wip					35000
Cost of Goods manufactured:					580000
Cost of goods sold:
Beginning inventory of FG				105000
Add: Cost of goods manufactured				580000
Total cost of goods available for sale				685000
Less: Ending inventory of FG				-110000
Costt of goods sold				575000
Income Statement:
Sales revenue				850000
less: Cost of goods sold				575000
Gross margin				275000
Lless: Operating expenses
Admin cost			50000
Salesman salaries			72000
Misc. office			40000
Total Operating expensnes				162000
Net income				113000