Answer:
a. Schedule of cost of goods manufactured for October 2017.
Raw materials costs ($264,000 + $18,000 - $29,000) $253,000
Direct labor costs $190,000
Depreciation on factory equipment $31,000
Indirect labor cost $28,000
Rent on factory facilities $60,000
Utilities expense $12,000 × 75% $9,000
Insurance expense $8,000 × 60% $4,800
Add Opening Work in process Inventory $20,000
Less Closing Work in process Inventory ($14,000)
Cost of goods manufactured $581,800
b. Income statement for October 2017.
Sales Revenue $780,000
Less Cost of Goods Sold :
Opening Finished goods Inventory $30,000
Add Cost of goods manufactured $581,800
Less Closing Finished goods Inventory ($50,000) ($561,800)
Gross Profit $218,200
Less Expenses :
Advertising expense $90,000
Selling and administrative salaries $75,000
Depreciation on sales equipment $45,000
Utilities expense 12,000 × 25 % $3,000
Insurance expense 8,000 × 40 % $3,200 ($216,200)
Net Profit / Loss $2,000
Explanation:
First, Prepare the cost of goods manufactured for October 2017 and include the amount in the calculation of cost of goods sold.
In the cost of goods manufactured schedule, include only the costs that are factory related.
Then, Prepare the income statement for October 2017, making sure to adjust the Utilities and Insurance expenses appropriately.
