Buck & Company incurred the following costs during August: Raw materials purchased $ 43,270 Direct labor...

Buck & Company incurred the following costs during August: Raw materials purchased $ 43,270 Direct labor ($12.3 per hour) 54,366 Manufacturing overhead (actual) 90,140 Selling expenses 31,450 Administrative expenses 14,150 Interest expense 6,274 Manufacturing overhead is applied on the basis of $19 per direct labor hour. Assume that overapplied or underapplied overhead is transferred to cost of goods sold only at the end of the year. During the month, 4,040 units of product were manufactured and 4,500 units of product were sold. On August 1 and August 31, Buck & Company carried the following inventory balances: August 1 August 31 Raw materials $ 19,600 $ 17,300 Work in process 53,300 56,500 Finished goods 41,100 20,523 Required: a-1. Prepare a statement of cost of goods manufactured for the month of August. (Amounts to be deducted should be indicated by minus sign.) a-2. Calculate the average cost per unit of product manufactured. (Round your answer to 2 decimal places.) b. Calculate the cost of goods sold during August. c-1. Calculate the difference between cost of goods manufactured and cost of goods sold. (Round intermediate calculations 2 decimal places.) c-2. How will this amount be reported in the financial statements? Raw materials inventory. Finished goods inventory. Work in progress inventory. d. Prepare a traditional (absorption) income statement for Buck & Company for the month of August. Assume that sales for the month were $281,900 and the company's effective income tax rate was 30%.

Solutions

Expert Solution

Solution:

a-1:

BUCK & COMPANY
STATEMENT OF COST OF GOODS MANUFACTURED
For the month of August
Raw Materials:
Raw material inventory, August 1	19,600
Purchases during August	43,270
Raw materials available for use	62,870
Less: Raw material inventory, August 31	-17300
Cost of raw material used		45,570
Direct labor cost incurred		54,366
Manufactured overhead applied		83,980
Total manufacturing cost, August		183,916
Add: work in process, August 1		53300
Less: work in process, August 31		-56500
Cost of goods manufactured, August		180,716

Manufacturing overhead applied = 54,366/12.3*$19/DLH

a-2: Average cost per unit = $180,716/4,500 = $40.16

Finished goods, August 1	41,100
Cost of goods manfactured	180716
Cost of goods available for sale	221,816
Less: Finished goods, August 31	-20523
Cost of goods sold	201,293

c-1. Since fewer units were produced (4,040) than sold (4,500), the finished goods account willdecrease by $18,474 ($40.16 per unit × 460 units), and cost of goods sold will be $18,474 more thancost of goods manufactured

c2.The difference between cost of goods manufactured and cost of goods sold is in the finished goods inventory account on the balance sheet.


BUCK & COMPANY
Absorption Income Statement
For the month of August
Sales	281,900
Cost of goods sold	201,293
Gross Profit	80,607
Selling and administrative expenses	-45600
Operating income	35,007
Interest expense	-6274
Income before taxes	28,733
Income tax expense	8619.9
Net Income	20,113


BUCK & COMPANY
Absorption Income Statement
For the month of August
Sales	281,900
Cost of goods sold	201,293
Gross Profit	80,607
Selling and administrative expenses	-45600
Operating income	35,007
Interest expense	-6274
Income before taxes	28,733
Income tax expense	8619.9
Net Income	20,113

ekkarill92 answered 1 year ago

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