Question

Fultz Company has accumulated the following budget data for the year 2020.

Answer 1

Answer:

Part a

Fultz Company

Schedule of cost of goods sold for 2020.

Direct Materials (5,110 x $5)                              $25,550

Direct Labor (3 x $12 x 5,110)                          $229,950

Manufacturing overheads (3 x $6 x 5,110)        $91,980

Total Cost                                                         $347,480

Part b

Fultz Company

Budgeted multiple-step income statement for 2020.

Sales (31,480 x $89)                                    $2,801,720

Less Cost of Sales                                        ($347,480)

Gross Profit                                                  $2,454,240

Less Expenses :

Operating Expenses

Selling and administrative expenses          ($170,000)

Operating Profit                                          $2,284,240

Less Non-Operating Expenses

Interest expenses                                          ($30,000)

Net Income before Income taxes             $2,254,240

Income tax expense                                    ($676,272)

Net Income after Interest and tax              $1,577,968

Explanation:

For a manufacturing firm, the cost of goods manufactured automatically becomes the cost of goods sold.

The first step is to calculate units of Raw Materials used. The difference in raw material inventories provides this amount as :

Units of Raw Materials used = 15,380 pounds - 10,270 pounds = 5,110 pounds

Remember a Multi-step Income Statement separates Profit generated from Primary Activities (Operating Profit) of the firm and those from Secondary Activities Activities (Net Income) as shown above.