Question

The following information is available for the Brown Company for the month ended July 31:

Direct materials purchased	$21,000
Direct labor (2,500 hrs@$12)	$30,000
Indirect labor	$3,000
Indirect materials	$2,500
Office supplies expense	$100
Factory equipment depreciation	$2,000
Office equipment depreciation	$750
Administrative expenses	$20,000
Office utilities	$75
Factory utilities	$200
Marketing expense	$2,500
Sales revenue	$150,000
Sales commissions expense	$1,500

	Beginning		Ending
Direct materials inventory	$27,000		$24,500
Work in process inventory	$25,000		$29,000
Finished goods inventory	$22,000		$15,000

1.) Determine the direct materials used in July.

2.) Determine costs of goods manufactured in July.

3.) Determine costs of goods sold in July.

4.) Prepare an income statement for July (Ignore taxes).

Answer 1

1
Direct materials inventory Beginning	27000
Add: Direct materials purchased	21000
Total materials available	48000
Less:Direct materials inventory, Ending	24500
Direct materials used	23500
2
Direct materials used		23500
Direct labor		30000
Manufacturing overhead:
Indirect labor	3000
Indirect materials	2500
Factory equipment depreciation	2000
Factory utilities	200
Total Manufacturing overhead		7700
Total manufacturing costs		61200
Add: Work in process inventory, beginning		25000
Less: Work in process inventory, ending		29000
Cost of goods manufactured		57200
3
Finished goods inventory, beginning	22000
Add: Cost of goods manufactured	57200
Cost of goods available for sale	79200
Deduct: Finished goods inventory, ending	15000
Cost of goods sold	64200
4
Income Statement
For the month ended July 31
Sales revenue		150000
Cost of goods sold		64200
Gross margin .		85800
Selling and administrative expenses:
Office supplies expense	100
Office equipment depreciation	750
Administrative expenses	20000
Office utilities	75
Marketing expense	2500
Sales commissions expense	1500	24925
Net operating income		60875