Question

Chaos Manufacturing had the following financial information for the year ended December 31 2018:

Inventory Balances:                Beginning                    Ending

Work in Progress                    $ 90,000                      $ 80,000

Finished Goods                       $ 77,000                      $ 67,000

Raw Materials                         $ 10,000                      $ 30,000

During the year, the budgeted and actual costs were as follows:

	Note	Actual
Raw Materials	1	290,000
Labour	2	518,000
Depreciation Factory Equipment		72,000
Depreciation Office Equipment		24,000
Building Rent	3	100,000
Maintenance – Factory Equipment		40,000
Utilities – Electrical	4	180,000
Utilities - Gas	5	90,000
Utilities - Telecom	6	22,000
Sales Commissions		30,000
Advertising		20,000
Shipping	7	16,000
Total		1,402,000

Sales for the year were $1,500,000

Note 1 – Raw material

90% of raw materials are traced directly to specific jobs, and the remaining 10% of raw materials are used throughout the production process and not traced. $290,000 in materials was purchased in the year.

Note 2 – Labour

Direct Labour $270,000 + Factory Salaries $85,000 + Head Office Salaries $163,000 = $518,000

Note 3 – Building Rent

The building is shared between the factory and the administrative office. 68% of the building is related to the factory, and the remaining 32% is related to the administrative office.

Note 4 – Utilities Electrical

90% of these costs are related to the factory, and 10% of these costs are related to the administrative office.

Note 5 – Utilities - Gas

All of the Gas is used to heat production equipment.

Note 6 – Utilities - Telecom

All of the Telecom costs are for sales people.

Note 7 – Shipping

All of the shipping costs are to ship finished goods to customers.

Required:

Prepare an income statement. You may include a schedule of Cost of Goods Manufactured and Cost of Goods Sold as separate schedule or as part of the Income Statement.

Answer 1

	Chaos Manufacturing
	for the year ended December 31 2018
	Particular	Note	Amount	Amount
1	Sales			1,500,000.00
2	Final Cost of Goods Sold	From E		1,104,000.00
3	Administrative Expesnes
	i) Head office Salaries	Ref Note 2	163,000.00
	ii) Depreciation office Equipment		24,000.00
	iii) Office Rent	32% Of Rent	32,000.00
	iv) Utilities Electrical	10% Of Utility Electrical	18,000.00	237,000.00
4	Selling And Distribution Cost
	i) Utility Telicom		22,000.00
	ii) Sales Commission		30,000.00
	iii) Advertisement		20,000.00
	iv) Shipping		16,000.00	88,000.00
5	Total Expenses	(2+3+4)		1,429,000.00
6	Profit/ Income	(1-5)		71,000.00
Note I COGS
	Raw Material
	Opening Stock		10,000.00
	Add: Purchase		290,000.00
	Total Raw Material			300,000.00
	Less: Closing Stock			3,000.00
A	Material Consumed			297,000.00
	WIP
	Opening Stock		90,000.00
	Add: Material Consumed	From A	297,000.00
	Add: Direct Labour	Ref Note 2	270,000.00
	Total WIP			657,000.00
	Less: Closing WIP			80,000.00
B	Ready Finished Good			577,000.00
	Finished Goods
	Opening Stock		77,000.00
	Add: Ready Finished Good	From B	577,000.00
	Total Available Finished Goods			654,000.00
	Less: Closing Finished Goods			67,000.00
C	Manufturing Cost of Goods Sold			587,000.00
D	Factory Overheads
	i) Factory Salaries	Ref Note 2	85,000.00
	ii) Factory Rent	68% Of Rent	68,000.00
	iii) Utilities GAS		90,000.00
	iv) Utilities Electrical	90% Of Utility Electrical	162,000.00
	v) Maintainance Factory Equipment		40,000.00
	vi) Depreciation of Factory Equipment		72,000.00	517,000.00
E	Final Cost of Goods Sold	(C+D)		1,104,000.00