Question

Orman Company produces neon-colored covers for tablets (e.g., iPads). For last year, Orman reported the following:

Work-in-process inventory, January 1		$ 13,100
Work-in-process inventory, December 31		28,290
Finished goods inventory, January 1		112,450
Finished goods inventory, December 31		85,320
Direct materials inventory, January 1		3,680
Direct materials inventory, December 31		2,810
Direct materials purchased		183,730
Direct labor		137,550
Plant depreciation		19,280
Salary, production supervisor		47,280
Indirect labor		68,210
Utilities, factory		15,810
Sales commissions		41,590
Salary, sales supervisor		75,310
Depreciation, factory equipment		32,080
Administrative expenses		167,590
Supplies (40% used in the factory, 60% used in the sales office)		17,990
Advertising expense		43,680

Last year, Orman produced 88,940 units and sold 90,690 units at $10.40 per unit.

Required:

1. Prepare a statement of cost of goods manufactured.

Orman Company
Statement of Cost of Goods Manufactured
For Last Year
Direct materials:
Beginning inventory	$
Add: Purchases
Less: Ending inventory
Direct materials used in production		$
Direct labor
Manufacturing overhead:
Plant depreciation	$
Salary, production supervisor
Indirect labor
Utilities, factory
Depreciation, factory equipment
Total manufacturing costs added		$
Cost of goods manufactured		$

2. Prepare an absorption-costing income statement.

Orman Company
Income Statement: Absorption Costing
For Last Year
		$
Cost of goods sold:
	$
	$
		$
Less operating expenses:
	$
		$

Answer 1

1. Statement of cost of goods manufactured

Direct materials
Beginning Inventory	$3,680
Direct materials Purchased	$183,730
Less: Ending inventory	($2,810)
Direct materials usee		$184,600
Direct labor		$137,550
Manufacturing overhead
Plant Depreciation	$19,280
Salary, production supervisor	$47,280
Indirect labor	$68,210
Utilities factory	$15,810
Depreciation factory	$32,080
Supplies (40%)	$7,196
Manufacturing overhead		$189,856
Total manufacturing costs		$512,006
Add: Work in process, beginning		$13,100
Total cost in process		$525,106
Less: Work in process, Ending		($28,290)
Cost of goods manufactured		$496,816

Finished goods inventory, begining	$112,450
Cost of goods manufactured	$496,816
Less: finished goods inventory, Ending	($85,320)
Cost of goods sold	$523,946

2.

Absorption Costing

Sales (90,690×$10.40)	$943,176
Cost of goods sold	$523,946
Gross margin	$419,230
Less: Operating expenses
Sales commission	$41,590
Sales, salaries expenses	$75,310
Administrative expenses	$167,590
Supplies(60%)	$10,794
Advertising expenses	$43,680
Operating expenses	$338,964
Net income	$80,266