Question

Waterways Corporation is a private corporation formed for the purpose of providing the products and the services needed to irrigate farms, parks, commercial projects, and private lawns. It has a centrally located factory in a U.S. city that manufactures the products it markets to retail outlets across the nation. It also maintains a division that performs installation and warranty servicing in six metropolitan areas.

The mission of Waterways is to manufacture quality parts that can be used for effective irrigation projects that also conserve water. By that effort, the company hopes to satisfy its customers, perform rapid and responsible service, and serve the community and the employees who represent them in each community.

The company has been growing rapidly, so management is considering new ideas to help the company continue its growth and maintain the high quality of its products.

Waterways was founded by Will Winkman who is the company president and chief executive officer (CEO). Working with him from the company’s inception is Will’s brother, Ben, whose sprinkler designs and ideas about the installation of proper systems have been a major basis of the company’s success. Ben is the vice president who oversees all aspects of design and production in the company.

The factory itself is managed by Todd Senter who hires his line managers to supervise the factory employees. The factory makes all of the parts for the irrigation systems. The purchasing department is managed by Helen Hines.

The installation and training division is overseen by vice president Henry Writer, who supervises the managers of the six local installation operations. Each of these local managers hires his or her own local service people. These service employees are trained by the home office under Henry Writer’s direction because of the uniqueness of the company’s products.

There is a small human resources department under the direction of Sally Fenton, a vice president who handles the employee paperwork, though hiring is actually performed by the separate departments. Teresa Totter is the vice president who heads the sales and marketing area; she oversees 10 well-trained salespeople.

The accounting and finance division of the company is headed by Ann Headman, who is the chief financial officer (CFO) and a company vice president; she is a member of the Institute of Management Accountants and holds a certificate in management accounting. She has a small staff of accountants, including a controller and a treasurer, and a staff of accounting input operators who maintain the financial records.

A partial list of Waterways’ accounts and their balances for the month of November follows.

Accounts Receivable		$274,600
Advertising Expenses		53,600
Cash		260,700
Depreciation—Factory Equipment		17,000
Depreciation—Office Equipment		2,400
Direct Labor		42,400
Factory Supplies Used		16,700
Factory Utilities		10,100
Finished Goods Inventory, November 30		68,700
Finished Goods Inventory, October 31		71,900
Indirect Labor		48,300
Office Supplies Expense		1,600
Other Administrative Expenses		72,300
Prepaid Expenses		41,500
Raw Materials Inventory, November 30		53,000
Raw Materials Inventory, October 31		38,400
Raw Materials Purchases		183,700
Rent—Factory Equipment		47,100
Repairs—Factory Equipment		4,500
Salaries		321,800
Sales Revenue		1,341,800
Sales Commissions		40,600
Work In Process Inventory October 31		52,800
Work In Process Inventory, November 30		41,600

A list of accounts and their values are given above. From this information, prepare a cost of goods manufactured schedule

A list of accounts and their values are given above. From this information, prepare an income statement.

Answer 1

1)

Waterways Corporation
Schedule of Cost of Goods Manufactured
For the Month of November
Direct materials:
Raw materials inventory, October 31	$38400
Add: Raw materials purchases	183700
Total raw materials available for use	222100
Less: Raw materials inventory, November 30	(53000)
Direct materials used		$169100
Direct labor		42400
Manufacturing overhead:
Depreciation- Factory equipment	17000
Factory supplies used	16700
Factory utilities	10100
Indirect labor	48300
Rent- Factory equipment	47100
Repairs- Factory equipment	4500
Total manufacturing overhead		143700
Total manufacturing costs			355200
Add: Work in process inventory October 31			52800
Total cost of work in process			408000
Less: Work in process inventory November 30			(41600)
Cost of goods manufactured			$366400

2)

Waterways Corporation
Income Statement
For the Month of November
Sales revenue		$1341800
Less: Cost of goods sold:
Finished goods inventory, October 31	$71900
Add: Cost of goods manufactured	366400
Cost of goods available for sale	438300
Less: Finished goods inventory, November 30	(68700)
Cost of goods sold		369600
Gross profit		972200
Less: Selling and administrative expenses:
Advertising expenses	53600
Depreciation- Office equipment	2400
Office supplies expense	1600
Other administrative expenses	72300
Salaries	321800
Sales commissions	40600
Total selling and administrative expenses		(492300)
Net operating income		$479900