Question

Activity rate = Estimated overhead costs/Expected activity

Machine Setup: $20000/50 = $400 per setup

Special Processing: $200000/8000 = $25 per machine hour

General Factory: $250000/12500 = $20 per direct labor hour

2.

	Product A	Product B	Product C
Direct labor costs	40000	190000	50000
Direct materials	100000	120000	60000
Overheads:
Machine setup	12000	4000	6000
Special processing	125000	70000	75000
General factory	50000	237500	40000
Total overheads	187000	311500	121000
Total costs	327000	621500	231000

3.

Actual manufacturing overhead	625500
Manufacturing overhead applied ($187000 + $311500 + $121000)	619500
Under-applied overhead $	6000

At the end of the month Product A and Product B production runs were fully completed. Product C was not fully completed and remains in work in process. All other work in process at the beginning of the month was completed by the end of the month. ABC Corporation has provided the following additional information about its inventories and sales activities:

Purchased of raw materials(Both indirect and direct)						$ 300,000.00
indirect materials included in manufacturing overhead						$    40,000.00
direct labor						?
manufacturing overhead applied to work in process						?
over/under applied overhead						?
Inventory account		Beginning balance		Ending Balance
raw materials		$ 200,000.00		?
work in process		$    40,000.00		?
finished goods		$ 500,000.00		$       600,000.00
Sales			$ 2,000,000.00
selling price per unit			$          5,000.00
variable selling expense per unit			$              120.00
variable admin expense per unit			$              230.00
total fixed selling expense			$      240,000.00
total fixed admin expense			$      320,000.00

Using the information provided above, please prepare a schedule of cost of goods manufactured, schedule of cost of goods sold, and contribution format income statement for ABC Corporation for the month ended March 31, 2020.

Answer 1

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Cost of goods manufactureed
Direct Material used:
Beginning inventory - Raw Material			$       200,000
Add: Purchase of Raw Material			$       300,000
Total Direct Material available			$       500,000
Less: Ending Inventory - Raw material			$     (180,000)
Total Material used			$       320,000
Less: Indirect Material used			$       (40,000)
Direct Material used			$       280,000
Direct Labor			$       280,000
Applied Overheads			$       619,500
Manufacturing cost for the period			$   1,179,500
Add: Beginning Inventory - Work in process			$         40,000
			$   1,219,500
Less: Ending inventory - Work in process	Cost of Product C		$     (231,000)
Cost of Goods manufactured			$       988,500
Cost of Goods Sold
Beginning Finished Goods Inventory		$       500,000
Add: Cost of goods manufactured		$       988,500
Cost of goods available for sale		$   1,488,500
Less: Ending finished goods inventory		$     (600,000)
Unadjusted cost of goods sold		$       888,500
Add: Underapplied overheads		$            6,000
Adjusted Cost of goods sold		$       894,500
Income Statement:
Sales		$   2,000,000
Less: Cost of goods sold		$     -894,500
Gross Margin		$   1,105,500
Less: Selling and Admin Expense
Variable Selling Expense	400*$120	$        -48,000
Variable Admin Expense	400*$230	$        -92,000
Fixed Selling Expense		$     -240,000
Fixed Admin Expense		$     -320,000
Net Income		$       405,500