Question

Question 3

The accounting records of Nutronics Inc include the following information for the year ended Dec 31. 2017

	Dec 31, 2017	Jan 1, 2017
Raw material inventory Work in process Finished goods inventory Direct Material used Direct labor Manufacturing overhead Selling expenses Administrative expenses Sales revenue	$24,000 8,000 90,000 210,000 120,000 192,000 170,000 140,000 720,000	$20,000 12,000 80,000

Required

A. Prepare a schedule of Cost of goods manufactured

B. Assume that the company manufactures a single product and that 20,000 units were completed during the year. What is the average per unit cost of manufacturing this product?

C. Assume that the company decides to sell the product at selling price at $25 per unit. What is your advice?

D. IGNORE YOUR ADVICE IN PART C. Assume the company sells a number of products. Compute the Cost of goods sold

E. Prepare an Income Statement for the company for the year ended Dec 31,

F. How is the company DOING FINANCIALLY in your opinion?

Answer 1

A. Schedule of Cost of goods manufactured is as prepared below:

Nutronics Inc
Statement of Cost of goods manufactured
For the year ending Dec 31, 2017
Particulars	Amount ($)	Amount ($)
Opening Material	20,000
Add: Direct Material purchase	2,14,000
Cost of material available for use	2,34,000
Less: Closing Direct Material	24,000
Cost of Material Used		2,10,000
Direct Labour Cost		1,20,000
Manufacturing Overhead		1,92,000
Total manufacturing Costs		5,22,000
Add: Beginning Work in Process	12,000
Less: Closing Work in Process	8,000
Cost of goods manufactured		5,26,000

B. Average per unit cost of manufacturing this product is 526,000/20,000 = 26.3

C. When company decides to sell the product at selling price at $25 per unit they will make a loss.

So company should sell product at more than 26.3

D. Cost of goods sold is as prepared below:

Nutronics Inc
Cost of goods sold
For the year ending Dec 31, 2017
Particulars	Amount ($)	Amount ($)
Cost of goods sold
Opening finished goods inventory	80,000
Add: Cost of goods manufactured	5,26,000
Total goods available for sale	6,06,000
Less: Closing finished goods inventory	90,000
Cost of goods sold		5,16,000

E. Income statement is as prepared below:

Nutronics Inc
Cost of goods sold
For the year ending Dec 31, 2017
Particulars	Amount ($)	Amount ($)
Sales		7,20,000
Less: Cost of goods sold
Opening finished goods inventory	80,000
Add: Cost of goods manufactured	5,26,000
Total goods available for sale	6,06,000
Less: Closing finished goods inventory	90,000
Cost of goods sold		5,16,000
Gross Margin		2,04,000
Selling Expenses	1,70,000
Administrative expenses	1,40,000
Net profit		-1,06,000

F. Financially company is not doing good as company is making losses.