Question

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.

Required:

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.

Answer 1

STEP 1: SCHEDULE OF COST OF GOODS MANUFACTURED:

STEP 2: COST OF GOODS SOLD:

PARTICULARS	$
Cost of goods manufactured	1067000
Add: Beginning Finished goods	77000
Cost of goods available for sale	1144000
Less: Ending Finished goods	(67000)
Cost of goods sold	1077000

STEP 3: INCOME STATEMENT:

All the best...