Answer:
DELRAY MFG.
Income Statement
For the year ended December 31, 2017
Sales $1,250,000
<u>Cost of goods sold 623,840</u>
Gross profit 626,160
General and
<u>Administrative expenses 129,300</u>
Net Income $496,860
DELRAY MFG.
Statement of Cost of Goods Sold
For the year December 31, 2017
Raw Material
Raw material, beginning $37,000
<u>Add: Purchases 175,600</u>
Raw materials available $212,600
<u>Less: Raw material, end 42,700 </u>
Cost of raw material used 169,900
<u>Add: Direct labor 225,000</u>
Prime Cost 394,900
<u> Add: Manufacturing overhead 221,090 </u>
Manufacturing cost 615,990
Add: Work in process, beginning 53,900
<u>Less: Work in process, Ending 41,500 </u>
Cost of Goods Manufactured 628,390
Add: Finished goods, beginning 62,750
Cost of goods available for sale 691,140
<u> Less: Finished goods, ending 67,300 </u>
Cost of goods sold $623,840
Explanation:
Income statement is computed by deducting cost of goods sold from the sales of the period to get the gross profit, then deduct the general and administrative expenses to get the net income for the period.
To compute cost of goods sold it started from the raw materials beginning inventory then add the purchases of the raw materials including the handling cost to get the raw materials available. Then deduct the raw materials end to get the cost of raw material used for the period. Add direct labor to get the prime cost and then add manufacturing overhead to the prime cost to get the manufacturing cost. Lastly, add work in process beginning and deduct the work in process end to get the cost of goods manufactured then add the finished goods beginning to get the cost of goods available for sale. And from there we deduct the finished goods ending inventory to get the cost of goods sold for the period.
