Question

The administrative offices and manufacturing plant of Billings Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year:
  

Administrative costs	$	1,658
Building and machine depreciation (75% of this amount is for factory)		900
Building utilities (90% of this amount is for factory)		1,310
Direct labor		845
Direct materials inventory, December 31		14
Direct materials inventory, January 1		10
Direct materials purchases		3,630
Factory supervision		481
Finished goods inventory, December 31		69
Finished goods inventory, January 1		55
Indirect factory labor		915
Indirect materials and supplies		679
Marketing costs		879
Property taxes on building (85% of this amount is for factory)		800
Sales revenue		12,916
Work-in-process inventory, December 31		25
Work-in-process inventory, January 1		32

Required:

Prepare an income statement with a supporting cost of goods sold statement. (Enter your answers in thousands of dollars (i.e., 234,000 should be entered as 234).)

Answer 1

		A
			PRODUCT COST($000)		Selling & Administration Costs($000)
	Administrative costs	1,658			Administrative cost	1,658
	Building and machine depreciation (75% of this amount is for factory)	900	Manufacturing Overhead	675	Administrative Expenses	225	(Manufacturing overhead=(0.75*900)
	Building utilities (90% of this amount is for factory)	1,310	Manufacturing Overhead	1179	Administrative Expenses	131	(Manufacturing overhead=(0.9*1310)
	Direct labor	845	Direct Labor cost	845
	Direct materials inventory, December 31	14	Direct Material cost	3,626			Direct Material=Beginning Inventory + Purchase - Ending Inventory(10+3630-14)
	Direct materials inventory, January 1	10
	Direct materials purchases	3,630
	Factory supervision	481	Manufacturing Overhead	481
	Finished goods inventory, December 31	69
	Finished goods inventory, January 1	55
	Indirect factory labor	915	Manufacturing Overhead	915
	Indirect materials and supplies	679	Manufacturing Overhead	679
	Marketing costs	879			Selling Expenses	879
	Property taxes on building (85% of this amount is for factory)	800	Manufacturing Overhead	680	Administrative Expenses	120	(Manufacturing overhead=(0.85*800)
	Sales revenue	12,916
	Work-in-process inventory, December 31	25
	Work-in-process inventory, January 1	32
			Total	9,080		3,013
	Work in process transferred to Finished goods Inventory:
A	Beginning Work in Process	32
B	Add:Direct Material	3,626
C	Add:Direct Labor	845
D	Add:Manufacturing Overhead	4609	(675+1179+481+915+679+680)
E	Less:Ending Work in process	25
F=A+B+C+D-E	Work in process transferred to Finished goods Inventory	9,087
	COST OF GOODS SOLD STATEMENT
G	Beginning Finished goods inventory	55
H	Add:Transferred from Work in process	9,087
I	Less: Ending Finished goods inventory	69
J=G+H-I	Cost of goods sold	9,073
			INCOME STATEMENT
			Figures in ($ 000)
			Sales Revenue	12,916
			Cost of goods sold	9,073
			Gross Profit	3,843
			Selling & Administrative expenses	3,013
			Operating Income	830