Question

Prepare an income statement. You may include a schedule of Cost of Goods Manufactured and Cost of Goods Sold as separate schedule or as part of the Income Statement.

Chaos Manufacturing had the following financial information for the year ended December 31 2018:

Inventory Balances:                Beginning                    Ending

Work in Progress                    $ 90,000                      $ 80,000

Finished Goods                       $ 77,000                      $ 67,000

Raw Materials                         $ 10,000                      $ 30,000

During the year, the budgeted and actual costs were as follows:

	Note	Actual
Raw Materials	1	290,000
Labour	2	518,000
Depreciation Factory Equipment		72,000
Depreciation Office Equipment		24,000
Building Rent	3	100,000
Maintenance – Factory Equipment		40,000
Utilities – Electrical	4	180,000
Utilities - Gas	5	90,000
Utilities - Telecom	6	22,000
Sales Commissions		30,000
Advertising		20,000
Shipping	7	16,000
Total		1,402,000

Sales for the year were $1,500,000

Note 1 – Raw material

90% of raw materials are traced directly to specific jobs, and the remaining 10% of raw materials are used throughout the production process and not traced. $290,000 in materials was purchased in the year.

Note 2 – Labour

Direct Labour $270,000 + Factory Salaries $85,000 + Head Office Salaries $163,000 = $518,000

Note 3 – Building Rent

The building is shared between the factory and the administrative office. 68% of the building is related to the factory, and the remaining 32% is related to the administrative office.

Note 4 – Utilities Electrical

90% of these costs are related to the factory, and 10% of these costs are related to the administrative office.

Note 5 – Utilities - Gas

All of the Gas is used to heat production equipment.

Note 6 – Utilities - Telecom

All of the Telecom costs are for sales people.

Note 7 – Shipping

All of the shipping costs are to ship finished goods to customers.

Answer 1

Answer-

Sales				$ 1,500,000
Less: Cost of Goods Sold:
Beginning Work in progress Inventory			$     90,000
Direct Material used:
Beginning Direct Material Inventory	$ 10,000
Add: Purchase	$290,000
Total Material available for use	$300,000
Less: Ending Inventory of Material	$ -10,000
Total Material used	$290,000
Direct Material used 90%		$261,000
Direct Labor		$270,000
Manufacturing Overheads:
Depreciation Factory Equipment	$ 72,000
Building Rent ($100,000*68%)	$ 68,000
Maintenance-Factory Equipment	$ 40,000
Utilities-Electrical ($180,000*90%)	$162,000
Utilities-Gas	$ 90,000
Factories Salaries	$ 85,000
Indirect Material ($290,000*10%)	$ 29,000
Total manufacturing Overheads		$546,000
Manufacturing Cost during the period			$1,077,000
Total manufacturing Cost			$1,167,000
Less: Ending WIP Inventory			$    -80,000
Cost of Goods Manufactured			$1,087,000
Add: Beginning Finished Goods Inventory			$     77,000
Cost of Goods available for sale			$1,164,000
Less: Ending Finished goods inventory			$    -67,000
Cost of Goods Sold				$-1,097,000
Gross Profit				$     403,000
Less: Selling and administrativ Expense
Depreciation office Equipment			$     24,000
Building Rent ($100,000*32%)			$     32,000
Utilities-Electrical ($180,000*10%)			$     18,000
Head office salaries			$   163,000
Utilities-Telecom			$     22,000
Sales Commission			$     30,000
Advertising			$     20,000
Shipping			$     16,000
Total Selling and Administrative Expense				$   -325,000
Net Income				$       78,000