Question

The following data refer to Laredo Luggage Company for the year 20x2:

Sales revenue	$	950,000
Work-in-process inventory, December 31		30,000
Work-in-process inventory, January 1		36,000
Selling and administrative expenses		150,000
Income tax expense		90,000
Purchases of raw material		170,000
Raw-material inventory, December 31		25,000
Raw-material inventory, January 1		20,000
Direct labor		190,000
Utilities: plant		40,000
Depreciation: plant and equipment		40,000
Finished-goods inventory, December 31		50,000
Finished-goods inventory, January 1		15,000
Indirect material used		10,000
Indirect labor		12,000
Other manufacturing overhead		80,000

1. Prepare Laredo Luggage’s schedule of cost of goods manufactured for the year

2. Prepare Laredo Luggage’s schedule of cost of goods sold for the year

3. Prepare Laredo Luggage’s income statement for the year.

Answer 1

Answer 1.
Statement of Cost of Goods Manufactured
Direct Material
Material Inventory, Jan 1	20,000.00
Material Purchased	170,000.00
Total Direct Material Available for Prouction	190,000.00
Material Inventory, Dec 31	(25,000.00)
Cost of Direct Materials Used in Productions		165,000.00
Direct Labor		190,000.00
Manufacturing Overhead
Utilities - Plant	40,000.00
Depreciation - Plant & Equipment	40,000.00
Indirect Material	10,000.00
Indirect Labor	12,000.00
Other MOH	80,000.00
Total Manufacturing Overhead		182,000.00
Total Manufacturing Costs incurred May		537,000.00
WIP Inventory, Jan 1		36,000.00
WIP Inventory, Dec 31		(30,000.00)
Cost of Goods Manufactured		543,000.00
Answer 2.
Statement of Cost of Goods Sold
Finished Goods Inventory, Jan 1	15,000.00
Cost of Goods Manufactured	543,000.00
Cost of Goods Available for Sale	558,000.00
Finished Goods Inventory, Dec 31	(50,000.00)
Cost of Goods Sold	508,000.00
Answer 3.
Income Statement
Sales	950,000.00
Cost of Goods Sold	508,000.00
Gross Margin	442,000.00
Selling & Admn. Expenses	150,000.00
Net Operating Income	292,000.00
Income Tax Expense	90,000.00
Net Income	202,000.00