Question

The following data (in thousands of dollars) have been taken from the accounting

records of Adi’s Custom Shoe Company as at September 30th

Sales

$ 450

Purchases of raw materials

$ 50

Direct Labour

$ 70

Manufacturing overhead

$ 60

Administrative expenses

$ 80

Selling expenses

$ 65

Ram materials inventory,

beginning

$ 20

Ram materials inventory,

ending

$ 20

Work in process inventory,

beginning

$ 30

Work in process inventory,

ending

$ 20

Finished goods inventory,

beginning

$ 45

Finished goods inventory,

ending

$ 35

Required:

1.Prepare a Schedule of the Cost of Goods Manufactured

2.Compute the Cost of Goods Sold

3.From the data above, prepare an Income Statement

Answer 1

1) Direct Materials Used:

Beginning Raw Materials Inventory = 20

Add: Cost of Raw Materials Purchased = 50

Total Raw Materials available = 20 + 50 = 70

Less: Ending Raw material Inventory = -20

Total Raw Materials Used = 70 - 20 = 50

Direct Labor = 70

Manufacturing Overhead = 60

Total Manufacturing Costs = 50 + 70 + 60 = 180

Add: Beginning Work-In Progress Inventory = 30

Less: Ending Work-In Progress Inventory = - 20

Cost of Goods Manufactured = 180 + 30 - 20 = 190

Below is the Cost of Goods Manufactured schedule:

Cost of Goods Manufactured Schedule at September 30th
Direct Materials Used
Beginning Raw Materials Inventory	20.00
Add: Cost of Raw Materials Purchased	50.00
Total Raw Materials available	70.00
Less: Ending Raw Materials Inventory	(20.00)
Total Raw Materials used		50.00
Direct Labor		70.00
Manufacturing Overhead		60.00
Total Manufacturing Costs		180.00
Add: Beginning Work-in Progress Inventory		30.00
		210.00
Less: Ending Work-in Progress Inventory		(20.00)
Cost of Goods Manufactured		190.00

2)

Cost of Goods Manufactured = 190 | Beginning Finished Goods Inventory = 45

Ending Finished Goods Inventory = 35

Total Goods Available for Sale = Beginning Finished Goods Inventory + Cost of Goods Manufactured

Total Goods Available for Sale = 45 + 190 = 235

Cost of Goods Sold = Total Goods Available for Sale - Ending Finished Goods Inventory

Cost of Goods Sold = 235 - 35 = 200

3)

Sales = 450

Cost of Goods Sold = 200

Gross Profit = 450 - 200 = 250

Selling Expenses = 65

Administrative Expenses = 80

Total Operating Expenses = 65 + 80 = 145

Operating Profit = 250 - 145 = 105

Below is the Income Statement prepared:

Income Statement at September 30th
Sales		450.00
Cost of Goods Sold:
Beginning Finished Goods Inventory	45.00
Add: Cost of Goods Manufactured	190.00
Total Goods Available for Sale	235.00
Less: Ending Finished Goods Inventory	(35.00)
Cost of Goods Sold		200.00
Gross Profit		250.00
Selling Expenses	65.00
Administrative Expenses	80.00
Total Operating Expenses		145.00
Operating Profit		105.00