Maryville, Inc., incurred the following costs during August: Raw materials used $ 30,400 Direct labor 50,500...

Maryville, Inc., incurred the following costs during August:


Raw materials used	$	30,400
Direct labor		50,500
Manufacturing overhead, actual		40,100
Selling expenses		25,130
Administrative expenses		20,670
Interest expense		10,000

During the month, 5,500 units of product were manufactured and 4,000 units of product were sold. On August 1, Maryville, Inc., carried no inventories. On August 31, there were no inventories other than finished goods.

Required:

a. Calculate the cost of goods manufactured during August and the average cost per unit of product manufactured.

b. Calculate the cost of goods sold during August.

c-1. Calculate the difference between cost of goods manufactured and cost of goods sold.

c-2. How will this amount be reported in the financial statements?

	Finished goods inventory
	Work in progress inventory
	Raw materials inventory

d. Prepare a traditional (absorption) income statement for Maryville, Inc., for the month of August . Assume that sales for the month were $232,371 and the company's effective income tax rate was 30%.

Solutions

Expert Solution

a) Cost of goods manufactured = Raw material used+Direct labor+Manufacturing overhead

= $30,400+$50,500+$40,100 = $121,000

Average cost per unit = Cost of goods manufactured/Units produced

= $121,000/5,500 units = $22 per unit

b) Cost of goods sold during August = Units sold*Average cost per unit

= 4,000 units*$22 per unit = $88,000

c) The difference between cost of goods manufactured and cost of goods sold will be reported as Finished Goods Inventory in the financial statements. The calculation of Finished goods inventory is shown as follows:-

Finished Goods Inventory = Cost of goods manufactured - Cost of goods sold

= $121,000 - $88,000 = $33,000

d) Maryville, Inc.,

Traditional Income Statement

For the Month of August (Amounts in $)

Sales	232,371
Less: Cost of goods sold	(88,000)
Gross Profit (A)	144,371
Operating Expenses:
Selling expenses	25,130
Administrative expenses	20,670
Interest expense	10,000
Total Operating Expenses (B)	55,800
Net Income before Income tax expense (A-B)	88,571
Less: Income tax expense ($88,571*30%)	(26,571)
Net Income	62,000

ekkarill92 answered 1 year ago

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