Question

Selected account balances for the year ended December 31 are provided below for Superior Company: Selling and administrative salaries $ 108,000 Insurance, factory 6,400 Utilities, factory 40,200 Purchases of raw materials ? Indirect labour 62,000 Direct labour 103,700 Advertising expense 75,100 Cleaning supplies, factory 7,700 Sales commissions 47,500 Rent, factory building 128,000 Maintenance, factory 30,000 Inventory balances at the beginning and end of the year were as follows: Beginning of the Year End of the Year Raw materials $ 50,800 $ 13,800 Work in process ? 34,200 Finished goods 43,000 83,000 The total manufacturing costs for the year were $718,000, and the cost of goods sold totalled $667,000.

Required: 1.a. Prepare a schedule of cost of goods manufactured.

1.b. Prepare the cost of goods sold section of the company's income statement for the year.

2. Assume that the dollar amounts given above are for the equivalent of 40,000 units produced during the year. Compute the average cost per unit for direct materials used and the average cost per unit for rent on the factory building. (Round your answers to 2 decimal places.)

3. Assume that in the following year the company expects to produce 50,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (Assume that direct materials are a variable cost and that rent is a fixed cost.) (Round your "Average Cost'' answers to 2 decimal places.)

Answer 1

1.

Superior Company Schedule of Cost of Goods Manufactured For the year ended December 31
Direct materials used
Beginning raw materials inventory	$ 50,800
Add: Purchase of raw materials	303,000
Cost of materials available for used	353,800
Less: Ending raw materials inventory	(13,800)	340,000
Direct labor		103,700
Manufacturing Overhead
Factory Insurance	6,400
Factory Utilities	40,200
Indirect Labor	62,000
Factory Cleaning Supplies	7,700
Factory Rent	128,000
Factory Maintenance	30,000	274,300
Total Manufacturing Costs		718,000
Add: Beginning Work in Process Inventory		23,200
Total Cost of Work in Process		741,200
Less: Ending Work in Process Inventory		(34,200)
Cost Of Goods Manufactured		$ 707,000

Cost of Goods Manufactured = Cost of Goods Sold + Ending Finished Goods Inventory - Beginning Finished Goods Inventory = $ 667,000 + $ 83,000 - $ 43,000 = $ 707,000

2. Average cost per unit for direct materials used = $ 340,000 / 40,000 units = $ 8.50

Average cost per unit for rent on factory building = $ 128,000 / 40,000 units = $ 3.20

3. Average cost per unit for direct materials : $ 8.50

Average cost per unit for rent on factory building = $ 128,000 / 50,000 units = $ 2.56