Question

Manufacturing Income Statement, Statement of Cost of Goods Manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:

	On Company		Off Company
Materials inventory, December 1	$86,200		$110,300
Materials inventory, December 31	(a)		124,710
Materials purchased	218,900		(a)
Cost of direct materials used in production	254,100		(b)
Direct labor	325,000		248,270
Factory overhead	100,860		123,590
Total manufacturing costs incurred in December	(b)		713,865
Total manufacturing costs	845,480		979,805
Work in process inventory, December 1	165,520		265,940
Work in process inventory, December 31	139,650		(c)
Cost of goods manufactured	(c)		707,260
Finished goods inventory, December 1	145,660		124,765
Finished goods inventory, December 31	152,590		(d)
Sales	1,270,720		1,103,580
Cost of goods sold	(d)		715,025
Gross profit	(e)		(e)
Operating expenses	165,540		(f)
Net income	(f)		244,015

Required:

1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

Letter	On Company	Off Company
a.	$	$
b.	$	$
c.	$	$
d.	$	$
e.	$	$
f.	$	$

2. Prepare On Company's statement of cost of goods manufactured for December.

Note: If an amount should be subtracted, begin entry with a minus (-) sign.

On Company
Statement of Cost of Goods Manufactured
For the Month Ended December 31
Work in process inventory, December 1			$
Direct materials:
Materials inventory, December 1	$
Purchases
Cost of materials available for use	$
Materials inventory, December 31
Cost of direct materials used in production		$
Direct labor
Factory overhead
Total manufacturing costs incurred during December
Total manufacturing costs			$
Work in process inventory, December 31
Cost of goods manufactured			$

3. Prepare On Company's income statement for December.

Note: If an amount should be subtracted, begin entry with a minus (-) sign.

On Company
Income Statement
For the Month Ended December 31
Sales		$
Cost of goods sold:
Finished goods inventory, December 1	$
Cost of goods manufactured
Cost of finished goods available for sale	$
Finished goods inventory, December 31
Cost of goods sold
Gross profit		$
Operating expenses
Net income		$

Answer 1

Requirement 1:

On Company

(a) Materials inventory, December 31 = Materials inventory, December 1 + Materials purchased - Cost of direct materials used in production

= $86,200 + $218,900 - $254,100

= $51,000

(b) Total manufacturing costs incurred in December = Cost of direct materials used in production + Direct labor + Factory overhead

= $254,100 + $325,000 + $100,860

= $679,960

(c) Cost of goods manufactured = Work in process inventory, December 1 + Total manufacturing costs incurred in December - Work in process inventory, December 31

= $165,520 + $679,960 - $139,650

= $705,830

(d) Cost of goods sold = Finished goods inventory, December 1 + Cost of goods manufactured - Finished goods inventory, December 31

= $145,660 + $705,830 - $152,590

= $698,900

(e) Gross profit = Sales - Cost of goods sold

= $1,270,720 - $698,900

= $571,820

(f) Net income = Gross profit - Operating expenses

= $571,820 - $165,540

= $406,280

Off Company

(b) Cost of direct materials used in production = Total manufacturing costs incurred in December - Direct labor - Factory overhead

= $713,865 - $248,270 - $123,590

= $342,005

(a) Materials purchased = Cost of direct materials used in production + Materials inventory, December 31 - Materials inventory, December 1

= $342,005 + $124,710 - $110,300

= $356,415

(c) Work in process inventory, December 31 = Total manufacturing costs incurred in December + Work in process inventory, December 1 - Cost of goods manufactured

= $713,865 + $265,940 - $707,260

= $272,545

(d) Finished goods inventory, December 31 = Cost of goods manufactured + Finished goods inventory, December 1 - Cost of goods sold

= $707,260 + $124,765 - $715,025

= $117,000

(e) Gross profit = Sales - Cost of goods sold

= $1,103,580 - $715,025

= $388,555

(f) Operating expenses = Gross Profit - Net Income

= $388,555 - $244,015

= $144,540

Requirement 2:

On Company

Statement of Cost of Goods Manufactured

For the Month Ended December 31

Particulars	$	$	$
Work in process inventory, December 1			$165,520
Direct Materials:
Materials inventory, December 1	86,200
Purchases	218,900
Cost of material available for use	305,100
Materials inventory, December 31	-51,000
Cost of direct materials used in production		254,100
Direct labor		325,000
Factory overhead		100,860
Total manufacturing costs incurred during December			679,960
Total Manufacturing costs			845,480
Work in process inventory, December 31			-139,650
Cost of goods manufactured			705,830

Requirement 3:

On Company

Income Statement

For the Month Ended December 31

Particulars	$	$
Sales		1,270,720
Cost of goods sold:
Finished goods inventory, December 1	145,660
Cost of goods manufactured	705,830
Cost of finished goods available for sale	851,490
Finished goods inventory, December 31	-152,590
Cost of goods sold		-698,900
Gross Profit		571,820
Operating Expenses		-165,540
Net Income		406,280

All the best...