Question

Maryville, Inc., incurred the following costs during August:

Raw materials used	$	34,700
Direct labor		51,600
Manufacturing overhead, actual		48,100
Selling expenses		29,120
Administrative expenses		15,580
Interest expense		10,000
During the month, 5,600 units of product were manufactured and 3,900 units of product were sold. On August 1, Maryville, Inc., carried no inventories. On August 31, there were no inventories other than finished goods. Required: a. Calculate the cost of goods manufactured during August and the average cost per unit of product manufactured. b. Calculate the cost of goods sold during August. c-1. Calculate the difference between cost of goods manufactured and cost of goods sold. d. Prepare a traditional (absorption) income statement for Maryville, Inc., for the month of August . Assume that sales for the month were $271,377 and the company's effective income tax rate was 35%. MARYVILLE, INC. Absorption Income Statement For the month of August

Answer 1

a.	Cost of goods manufactured:
					$
	Raw materials used				34700
	Direct labor				51600
	Manufacturing overhead				48100
	Total manufacturing cost				134400
	Add: Beginning work in process inventory				0
					134400
	Less: Ending work in process inventory				0
	Cost of goods manufactured				134400
	Average cost per unit of product manufactured=Cost of goods manufactured/Units produced=134400/5600=$24 per unit
b.	Cost of goods sold:
					$
	Cost of goods manufactured				134400
	Add: Beginning finished goods inventory				0
					134400
	Less: Ending finished goods inventory
	(Note:1)				40800
	Cost of goods sold				93600
	Note:1
	Units produced				5600
	Less: units sold				3900
	Finished goods inventory				1700
	Cost of finished goods inventory=Finished goods inventory in units*Average cost per unit=1700*24=$ 40800
c-1.	Diff. between cost of goods manufactured and cost of goods sold=Cost of goods manufactured-cost of goods sold=134400-93600=$ 40800
d.				Absorption income statement
					$	$
	Sales					271377
	Less: cost of goods sold					93600
	Gross profit					177777
	Less:
	Selling expenses				29120
	Administrative expenses				15580	44700
	Operating income					133077
	Less:Interest expense					10000
	Income before taxes					123077
	Less: Tax at 35%					43077
	Net income					80000
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