Question

Consider the following information for Superior Window Corporation for the year ended December 31, 2017:

                        Depreciation expense – Administrative office                        $ 40,000

                        Depreciation expense – Plant and equipment                           80,000

                        Direct labor – Wages                                                               500,000

                        Direct materials inventory, Dec. 31, 2017                                  20,000

                        Direct materials inventory, Jan 1, 2017                                      30,000

                        Direct material purchases                                                        180,000

                        Finished goods inventory, Dec. 31, 2017                                   40,000

                        Finished goods inventory, Jan 1, 2017                                       10,000

                        Heat, light & power – Plant                                                        50,000

                        Indirect labor                                                                               50,000

                        Property taxes – Plant                                                                 50,000

                        Sales representatives’ salaries                                                   160,000

                        Accounts receivable                                                                  400,000

                        Plant supervisor’s salary                                                             65,000

                        Supplies – Administrative office                                                  5,000

                        Supplies – Plant                                                                          25,000

                        Work-in-Process inventory, Dec 31, 2017                                 15,000

                        Work-in-Process inventory, Jan 1, 2017                                    25,000

                        Accounts payable                                                                      140,000     

                        Property, plant, and equipment                                                 800,000

a) Determine the total amount of cost of goods manufactured for 2017.

b) Compute the cost of goods sold for 2017.

c) What level of sales would have generated operating income of $300,000?

d) From the above list of accounts indicate one item that is an example of a(n):

i. indirect cost

ii. product cost

iii. period cost

iv. direct cost

Answer 1

a)

Direct materials inventory, Jan 1, 2017	30000
Purchase	180000
Direct materials inventory, Dec. 31, 2017	(20000)
Raw material used		190000
Direct labor – Wages		500000
Factory overhead
Depreciation expense – Plant and equipment	80000
Heat, light & power – Plant	50000
Indirect labor	50000
Property taxes – Plant	50000
Plant supervisor’s salary	65000
Supplies – Plant	25000
Factory overhead		320000
Total manufactuirng cost		1010000
Work-in-Process inventory, Jan 1, 2017		25000
Work-in-Process inventory, Dec 31, 2017		(15000)
cost of goods manufactured [Part A]		1020000
Beginning Finished goods inventory, Jan 1, 2017		10000
Finished goods inventory, Dec. 31, 2017		(40000)
COst of goods sold [Part B]		990000

3)Total OPerating expense =Depreciation expense – Administrative office 40000+ Sales representatives’ salaries         160000+ Supplies – Administrative office 5000

          205000

Sales Desired =Cost of good sold +operating expense+ Profit

       = 990000+205000+300000

      = 1495000

d(i)Indirect cost : Heat, light & power – Plant

product cost -Property taxes – Plant

period cost - Sales representatives’ salaries

direct cost - Direct labor – Wages