Answer:
a. Statement of cost of goods manufactured.
$ $
Beginning work-in-process inventory 13,040
Raw Materials :
Beginning materials inventory 46,800
Add Purchases of raw materials 320,000
Available for Production 366,800
Ending materials inventory (66,800) 300,000
Direct labor 200,000
Indirect labor 40,000
Rent, factory building 42,000
Depreciation, factory equipment 60,000
Utilities, factory 11,900
Ending work-in-process inventory (14,940)
Cost of goods manufactured 652,000
b. Average cost of producing one unit of product in the year.
Average cost = Total Cost ÷ Total units produced
= $652,000 ÷ 4,000
= $163.00
c. Prepare an income statement for external users.
$
Sales (3,800 × $400) 1,520,000
Less Cost of Goods Sold ($163.00 × 3,800) (619,400)
Gross Profit 900,600
Less Expenses :
Salary, sales supervisor (90,000
)
Commissions, salespersons (180,000
)
General administration (300,000)
Net Income / (Loss) 330,600
Explanation:
<u>Determination of leather recliners sold during the year.</u>
Units Sold = Opening Finished Inventory + Units Produced - Ending Finished Inventory
= 500 + 4,000 - 700
= 3,800
Other Notes :
Include only manufacturing costs in the statement of goods manufactured.
External users would want to see an income statement prepared using an absorption costing system in line with financial reporting standards.
