Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows. (a) Indicate…
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Question “Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows. (a) Indicate…”
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b) Prepare a condensed cost of goods manaufactures schdule ffor
Case1
c1) Prepare an Income statement for Case 1
c2) Prepare the current assets section of the balance sheet for
Case1. Assume that in Case 1 the other items in the current assets
section are as follows: Cash $4,000, Receivables (net) $15,000, Raw
Materials $600 and Prepaid Expenses $400.
Answer
Cost The estimated cost of various expenses associated with the production of merchandise is cost. Costs that directly relate to the product are direct costs. Indirect costs are those that have a direct relation to the product. These costs include material, labor, as well as expenses.
Direct materialIt’s one of the costs that directly relates to the manufacturing of the product. The raw material is what is needed to make the finished goods. Direct material costs can be charged directly to the final product, whereas indirect materials are not.
Direct labor isIt’s one of the costs that is needed to convert the raw material inventory into finished good inventory. The direct labor cost can be traced to a particular product or cost center. This refers to the direct labor cost that is involved in the transformation from raw material into finished product.
Manufacturing overheads It is an indirect cost that is necessary for production. This includes indirect material costs, indirect labor costs, and indirect expenses. Manufacturing overhead includes expenses like depreciation of machines, foreman salaries, and electricity expenses.
Manufacturing Cost: The cost and expenses that are incurred to manufacture the inventory are included within manufacturing cost. This includes both the manufacturing overheads and prime cost. It is the initial cost of production. It includes direct material, direct labor, and direct expenses.
Inventory in progress: The inventory that has not been completed during production is work-inprogress inventory. Although the process of production has been applied to the raw materials, it is not complete. This includes direct material, direct labor and any expenses incurred in producing this inventory.
Sales It is the company’s main revenue. Sales revenue can be used to pay for various expenses, fixed expenses, and inventory adjustment. It is calculated by multiplying the selling price per unit and the number of units sold.
Finished goods inventory The inventory that is in production and ready for sale. The final goods cost includes the prime price, manufacturing overheads and administration overheads.
Gross Profit: It is the first profit after deducting inventory costs from sales. Non-operating expenses have not been reduced from gross profit.
Operating expenses These are the costs and expenses that are necessary to run the business and generate income.
Net Income:It’s the net income earned from reducing all non-operating and operating expenses from sales revenue. Non-operating expenses can be taken out of gross profit to calculate net income.
(a.1)
As shown below, calculate the total manufacturing cost for case 1.
\begin{array}{c}\\{\rm{Total manufacturing cost}} = \left( {{\rm{Direct material}}} \right) + \left( {{\rm{Direct labor}}} \right) + \left( {{\rm{Manufacturing overhead}}} \right)\\\\ = \$ 9,600 + \$ 5,000 + \$ 8,000\\\\ = \$ 22,600\\\end{array}(a.2)
Calculate the end work-in-progress inventory (WIP), for case 1, as shown below.
\begin{array}{c}\\{\rm{Cost of goods manufactured}} = \left( {{\rm{Total manufacturing cost}}} \right) + \left( {{\rm{Beginning WIP inventory}}} \right)\\\\ - \left( {{\rm{Ending WIP inventory}}} \right)\\\\{\rm{Ending WIP inventory}} = \left( {{\rm{Total manufacturing cost}}} \right) + \left( {{\rm{Beginning WIP inventory}}} \right)\\\\ - \left( {{\rm{Cost of goods manufactured}}} \right)\\\\ = \$ 22,600 + \$ 1,000 - \$ 17,000\\\\ = \$ 6,600\\\end{array}(a.3)
Calculate the starting inventory of finished goods for case 1.
\begin{array}{c}\\{\rm{Beginning finished goods inventory}} = \left( {{\rm{Goods available for sale}}} \right)\\\\ - \left( {{\rm{Cost of goods manufactured}}} \right)\\\\ = \$ 20,000 - \$ 17,000\\\\ = \$ 3,000\\\end{array}(a.4)
Below is a table that shows how to calculate the inventory cost in case 1.
\begin{array}{c}\\{\rm{Cost of goods sold}} = \left( {{\rm{Goods available for sale}}} \right) - \left( {{\rm{Ending finished goods inventory}}} \right)\\\\ = \$ 20,000 - \$ 3,400\\\\ = \$ 16,600\\\end{array}(a.5)
Below is how to calculate gross profit for case 1.
\begin{array}{c}\\{\rm{Gross profit}} = \left( {{\rm{Sales revenue}}} \right) - \left( {{\rm{Sales discount}}} \right) - \left( {{\rm{Cost of goods sold}}} \right)\\\\ = \$ 24,500 - \$ 2,500 - \$ 16,600\\\\ = \$ 5,400\\\end{array}(a.6)
Below is how to calculate net income for case 1.
\begin{array}{c}\\{\rm{Net income}} = {\rm{Gross profit}} - {\rm{Operating expenses}}\\\\ = \$ 5,400 - \$ 2,500\\\\ = \$ 2,900\\\end{array}(a.7)
As shown below, compute the beginning work-in progress inventory for case 2.
\begin{array}{c}\\{\rm{Cost of goods manufactured}} = \left( {{\rm{Total manufacturing cost}}} \right) + \left( {{\rm{Beginning WIP inventory}}} \right)\\\\ - \left( {{\rm{Ending WIP inventory}}} \right)\\\\{\rm{Beginning WIP inventory}} = \left( {{\rm{Cost of goods manufactured}}} \right) - \left( {{\rm{Total manufacturing cost}}} \right)\\\\ + \left( {{\rm{Ending WIP inventory}}} \right)\\\\ = \$ 22,000 - \$ 16,000 + \$ 3,000\\\\ = \$ 9,000\\\end{array}(a.8)
Below is a list of the costs of the goods that are available for sale in case 2.
\begin{array}{c}\\{\rm{Goods available for sale}} = \left( {{\rm{Cost of goods manufactured}}} \right)\\\\ + \left( {{\rm{Beginning finished goods inventory}}} \right)\\\\ = \$ 22,000 + \$ 3,300\\\\ = \$ 25,300\\\end{array}(a.9)
Below is a table that will help you determine the price of the goods that were sold in case 2.
\begin{array}{c}\\{\rm{Cost of goods sold}} = \left( {{\rm{Goods available for sale}}} \right) - \left( {{\rm{Ending finished goods inventory}}} \right)\\\\ = \$ 25,300 - \$ 2,500\\\\ = \$ 22,800\\\end{array}(a.10)
Below is a formula to calculate the sales revenue for case 2.
\begin{array}{c}\\{\rm{Sales revenue}} = \left( {{\rm{Cost of goods sold}}} \right) + \left( {{\rm{Sales discount}}} \right) + \left( {{\rm{Gross profit}}} \right)\\\\ = \$ 22,800 + \$ 1,400 + \$ 7,000\\\\ = \$ 31,200\\\end{array}(a.11)
Below are the operating expenses for case 2.
\begin{array}{c}\\{\rm{Operating expenses}} = {\rm{Gross profit}} - {\rm{Net income}}\\\\ = \$ 7,000 - \$ 5,000\\\\ = \$ 2,000\\\end{array}(b)
As shown below, calculate the condensed price of goods produced for case 1.
Use the spreadsheet formulas below to calculate the condensed price of goods produced for case 1.
(c.1)
As shown below, prepare the income statement for Case 1.
Use the following spreadsheet formulas to prepare the income statement for case 1.
(c.2)
As shown below, prepare the section of current assets in case 1.
Use the following spreadsheet formulas to prepare section 1 of your current assets:
Ans: Part A.1
Case 1 has a total manufacturing cost of $22,600.
Part a.2
Case 1’s end-of-work-in-progress inventory is $6,600
Part a.3
In case 1, the starting finished goods inventory is $3,000.
Part a.4
Case 1: $16,600 is the cost of goods.
Part a.5
Case 1: Gross profit is $5,400
Part a.6
Case 1’s net income is $2,900
Part a.7
Case 2’s inventory for work-in-progress is in its beginning stages at $9,000.
Part a.8
Case 2 has goods available for sale at $25,300
Part a.9
Case 2: $22,800 is the cost of goods.
Part a.10
Case 2’s sales revenue is $31,200
Part a.11
Case 2 has operating expenses of $12,000.
Part b
Case 1: $17,000 for goods.
Part c.1
Case 1’s net income is $2,900
Part c.2
Case 1’s current assets are $30,000.
Conclusion
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