Answer:
Brody Company
1. Direct Materials Used in Production:
Beginning balance, raw materials $124,000
Raw materials purchase 250,000
Raw materials for production $374,000
less raw materials, ending balance 102,000
Cost of Direct materials used $272,000
2. Total Prime Cost:
Cost of Direct materials used $272,000
Direct labor 140,000
Total Prime Cost $412,000
3. Total Conversion Cost:
Direct labor $140,000
Factor overheads:
Depreciation on factory equipment 45,000
Depreciation on building 30,000
Factory insurance 15,000
Property Taxes $20,000
Utilities for factory 34,000
Indirect labor salaries 156,000
Total Conversion Cost = $440,000
4. Cost of Goods Manufactured Statement:
Prime Cost $412,000
Conversion cost $440,000
Beginning Work in Process 124,000
less ending work in process (130,000)
Cost of goods manufactured $846,000
Unit Product Cost = $846,000/100,000 = $8.46
5. Cost of Goods Sold Statement:
Cost of goods manufactured $846,000
Beginning finished goods 84,000
less ending finished goods (82,000)
Cost of goods sold $848,000
6. Income Statement %
Sales Revenue $1,200,000 100
Cost of goods sold 848,000 71
Gross Profit $352,000 29
Operating Expenses:
Depreciation on building $50,000 4
Property Taxes 18,000 1.5
Sales Office Utilities 1,800 0.15
Administrative salaries 150,000 12.5
Sales office salaries 90,000 7.5
Sales Commission 60,000 5
Total Operating Expenses $369,800 31
Net Loss ($17,800) 14.83
Explanation:
Raw materials purchases $250,000
Direct labor 140,000
Depreciation on factory equipment 45,000
Depreciation on building 30,000
Depreciation on headquarters building 50,000
Factory insurance 15,000
Property taxes:
Factory 20,000 and Headquarters 18,000
Utilities for factory 34,000
Utilities for sales office 1,800
Administrative salaries 150,000
Indirect labor salaries 156,000
Sales office salaries 90,000
Beginning balance, raw materials 124,000
Beginning balance, work in process 124,000
Beginning balance, finished goods 84,000
Ending balance, raw materials 102,000
Ending balance, work in process 130,000
Ending balance, finished goods 82,000
b) Sales Commission = $60,000 (5% of $1,200,000)
c) Prime cost is the cost of direct raw materials and direct labor. Conversion cost includes the cost of direct labor and factory overheads.
