Question

Mesa Designs produces a variety of hardware products, primarily for the do-it-yourself (DIY) market. As part of your job interview as a summer intern at Mesa, the cost accountant provides you with the following (fictitious) data for the year (in $000):

  

Inventory information:	1/1/00		12/31/00
Direct materials	$	49	$	56
Work-in-process		77		69
Finished goods		988		1,014

  

Other information:	For the year ’00
Administrative costs	$	2,200
Depreciation (Factory)		2,830
Depreciation (Machines)		4,630
Direct labor		6,600
Direct materials purchased		5,160
Indirect labor (Factory)		1,680
Indirect materials (Factory)		490
Property taxes (Factory)		190
Selling costs		1,080
Sales revenue		30,610
Utilities (Factory)		540

  

Required:

Prepare the income statement with a supporting cost of goods sold statement.

Answer 1

Solution :

Cost of goods sold - Mesa Designs
Particulars		Amount (In'000)
Beginning Direct material inventory	$49.00
Direct material purchased	$5,160.00
Ending direct material inventory	-$56.00
Direct material consumed		$5,153.00
Direct labor		$6,600.00
Manufacturing overhead:
Depreciation (Factory)	$2,830.00
Depreciation (Machines)	$4,630.00
Indirect labor (Factory)	$1,680.00
Indirect materials (Factory)	$490.00
Property taxes (Factory)	$190.00
Utilities (Factory)	$540.00
Total manufacturing overhead		$10,360.00
Total manufacturing cost incurred		$10,360.00
Add: Beginning WIP		$77.00
Less: Ending WIP		-$69.00
Cost of goods manufactured		$10,368.00
Add: Beginning finished goods inventroy		$988.00
Less: Ending finished goods inventory		-$1,014.00
Cost of goods sold		$10,342.00

Income Statement - Mesa Designs
Particulars		Amount (In'000)
Sales Revenue		$30,610.00
Cost of goods sold		$10,342.00
Gross Margin		$20,268.00
Operating expenses:
Administrative costs	$2,200.00
Selling Cost	$1,080.00
Total operating expenses		$3,280.00
Net Operating Income		$16,988.00