Question

Jordan Company produced 150,000 floor lamps during the past calendar year. Jordan had
2,500 floor lamps in finished goods inventory at the beginning of the year. At the end of
the year, there were 11,500 floor lamps in finished goods inventory. The lamps sell for $50
each. Jordan’s accounting records provide the following information for the past year:

Purchases of direct materials $1,675,000
Direct materials inventory, January 1 380,000
Direct materials inventory, December 31 327,000
Direct labor 2,000,000
Indirect labor 790,000
Depreciation, factory building 1,100,000
Depreciation, factory equipment 630,000
Property taxes on the factory 65,000
Utilities, factory 150,000
Insurance on the factory 200,000
Research and development 120,000
Salary, sales supervisor 85,000
Commissions, salespersons 370,000
General administration 390,000
Work in process inventory, January 1 450,000
Work in process inventory, December 31 750,000
Finished goods inventory, January 1 107,500
Finished goods inventory, December 31 489,000
Required:
1. Prepare a cost of goods manufactured statement.
2. Compute the cost of producing one floor lamp last year.
3. Prepare an income statement on an absorption-costing basis.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you.
Part 1
Beginning inventory		$          380,000
Add: Purchases		$      1,675,000
Materials available		$      2,055,000
Less: Ending inventory		$       (327,000)
Direct materials used			$   1,728,000
Direct labor			$   2,000,000
Manufacturing overhead:
Insurance on factory		$          200,000
Indirect labor		$          790,000
Depreciation, factory building		$      1,100,000
Depreciation, factory equipment		$          630,000
Property taxes on factory		$            65,000
Utilities, factory		$          150,000	$   2,935,000
Total manufacturing costs added			$   6,663,000
Add: Beginning work in process			$       450,000
Less: Ending work in process			$     (750,000)
Cost of goods manufactured			$   6,363,000
Part 2	Unit cost = $6,363,000/150,000	$              42.42
Part 3
Sales (141,000* × $50)		$      7,050,000
Cost of goods sold:
Cost of goods manufactured	$                                                                           6,363,000
Add: Beginning finished goods inventory	$                                                                               107,500
Goods available for sale	$                                                                           6,470,500
Less: Ending finished goods inventory	$                                                                             (489,000)	$      5,981,500
Gross margin		$      1,068,500
Less:
Research and development	$                                                                               120,000
Salary, sales supervisor	$                                                                                 85,000
Commissions, salespersons	$                                                                               370,000
Administrative expenses	$                                                                               390,000	$          965,000
Income before taxes	$	$          103,500
*2,500 + 150,000 – 11,500 = 141,000 units sold.