Question

The following information is available for Aikman Company. January 1, 2022 2022 December 31, 2022 Raw materials inventory $21,000 $30,000 Work in process inventory  13,500  17,200 Finished goods inventory  27,000  21,000 Materials purchased $150,000 Direct labor  220,000 Manufacturing overhead  180,000 Sales revenue  910,000 Instructions a. Compute cost of goods manufactured. b. Prepare an income statement through gross profit. c. Show the presentation of the ending inventories on the December 31, 2022, balance sheet. d. How would the income statement and balance sheet of a merchandising company be different from Aikman's financial statements?

Answer 1

Answer:

a. $537,300

b.            Aikman Company  

             Income Statement  

For the year ended December 31, 2022  

 

Sales Revenue                 $910,000

Less: Cost of goods sold  

Raw material, beginning               21,000

Add:Purchases                  150,000

Raw materials available    171,000

Less: Raw material, end    30,000

Cost of raw material used    141,000

Add: Direct labor                  220,000

Prime Cost                           361,000

Add: Factory overhead   180,000

Manufacturing cost            541,000

Add: Work in process, beginning   13,500

Less: Work in process, Ending     17,200

Cost of Goods Manufactured  537,300

Add: Finished Goods, beginning   27,000

Less: Finished Goods, Ending    21,000

Cost of Goods Sold          543,300

Gross Profit                 $366,700

c. Raw materials, ending $30,000

Work in process, ending $17,200

Finished goods, ending $21,000

Total inventory               $68,200

d. The difference in the balance sheet and income statement of Aikman Company to Merchandising company is that, Aikman income statement consists of expenses arising from the manufacturing of goods that the merchandising company never incur. In addition to that, Aikman Company has ending inventory of Raw materials, work in process and finished goods while the other merchandising company only has ending inventory of good purchased not yet sold.

Explanation:

a. Aikman's statement of goods manufactured is presented below.    

               Aikman Company

Statement of Cost of Goods Manufactured

For the year ended December 31, 2022

Raw material, beginning               21,000

Add:Purchases                  150,000

Raw materials available    171,000

Less: Raw material, end    30,000

Cost of raw material used    141,000

Add: Direct labor                  220,000

Prime Cost                           361,000

Add: Factory overhead   180,000

Manufacturing cost            541,000

Add: Work in process, beginning   13,500

Less: Work in process, Ending     17,200

Cost of Goods Manufactured  537,300

b. Income statement of Aikman starts from the sales revenue that the company incurs for the period and then deduct the cost of goods sold to arrive the gross profit.

c. Aikman's inventory balance consists of Raw materials, work in process and finished goods balances.