B.
Compute the gross margin
C.
Compute the operating income
D.
Compute the operating income if 75,000 stereos were produced and 69,000 were sold.
14. Baleen Company supplied the following data at the end of the current year:
Sales commissions
$ 12,000
Sales revenue
120,000
Research and development
17,000
Finished goods inventory, Jan. 1
7,500
Work in process inventory, Jan 1
9,000
Finished goods inventory, Dec. 31
6,000
Work in process inventory, Dec. 31
11,000
Cost of goods manufactured
52,000
Required: Prepare an income statement for Baleen Company.
Sales revenue
Cost of goods sold*
Gross margin
66,500
Less:
Selling expense
12,000
Administrative expense
75,000 $575 = $43,125,000
B.
Sales revenue
Cost of goods sold
(75,000 $540)
Gross margin
C.
Gross margin
Selling and admin. expenses
Operating income
625,000
D.
Sales revenue
Cost of goods sold
(69,000 $540)
Gross margin
Selling and admin. expenses
Operating income
415,000
15. Macon Company supplied the following data and information on inventories at the end of the current
year.
December 31,2011
Materials
$23,500
Work in process
8,500
Finished goods
27,000
Direct labor
$ 40,000
Selling expenses
31,000
Sales revenue
400,000
Administrative expenses
14,500
Purchases of raw materials
62,000
Factory supervision
50,000
Factory supplies used
25,000
Required: Prepare an income statement of Macon Company for the current year.
Sales revenue
Cost of goods sold*
Gross margin
217,500
Less:
Selling expenses
31,000
Administrative expenses
Operating income
*Cost of goods manufactured**
26,000
182,500
**Purchases of raw materials
$ 62,000
Materials inventory, 1/1
21,000
Materials inventory, 12/31
Materials used
59,500
Direct labor
40,000
Overhead ($50,000 + $25,000)
Operating income
$ 37,500
*Cost of goods manufactured
$ 52,000
16. Bartlow Company has supplied the following information from its accounting records for the month of
May.
Direct labor cost
$11,500
Purchases of raw materials
20,000
Factory depreciation
7,500
Advertising
10,000
Factory property taxes
6,500
Materials inventory, 5/1
1,250
Materials inventory, 5/31
2,500
Work in process Inventory, 5/1
?
Work in process Inventory, 5/31
1,500
Cost of goods manufactured
45,850
Sales revenue
?
Executive salary cost
25,000
Finished goods inventory, 5/1
5,500
Finished goods inventory, 5/31
4,250
Operating income
67,900
Gross margin
?
Required: Solve for the missing amounts (?)
Materials inventory, 5/1
Purchases of materials
20,000
Materials inventory, 5/31
Materials used
$18,750
Direct labor
11,500
Overhead (7,500 + 6,500)
Total manufacturing costs
44,250
Work in process, 5/1
3,100
Work in process, 5/31
Cost of goods manufactured
$45,850
Sales revenue
Cost of goods sold*
Total manufacturing costs
174,500
Work in process inventory, Jan. 1
17,500
Work in process inventory, Dec. 31
Cost of goods manufactured
17. See the following separate cases.
Case #1
Case #2
Sales
$1,000
$1,300
Cost of goods manufactured
A
500
Finished goods inventory (beginning balance)
100
D
Finished goods inventory (ending balance)
150
200
Cost of goods sold
B
600
Gross margin
300
E
Selling expenses
C
75
Administrative expenses
50
40
Operating income
200
F
Required: Solve for the missing amounts (A,B,C,D,E,F)
Case #1
Case #2
Sales
Cost of goods manufactured
750
500
Finished goods inventory (beginning balance)
100
Finished goods inventory (ending balance)
Cost of goods sold
Gross margin
300
700
Selling expenses
50
75
Administrative expenses
Operating income
200
585
18. See the following separate cases.
Case #1
Case #2
Purchase of materials
$ 5,000
C
Gross margin
Less:
Selling expense
10,000
Administrative expense
Operating income
*Cost of goods manufactured
Finished goods inventory, 5/1
Finished goods inventory, 5/31
Cost of goods sold
Materials inventory (beginning balance)
A
220
Materials inventory (ending balance)
1,000
350
Direct labor
7,000
4,250
Factory supervision
1,500
1,100
Factory supplies
1,250
900
Total manufacturing costs
14,500
D
Work in process inventory (beginning balance)
1,200
1,230
Work in process inventory (ending balance)
B
650
Cost of goods manufactured
14,600
10,200
Required: Solve for the missing amounts (A,B,C,D).
19. Rancor Company’s accountant prepared the following income statement for the month of August.
Rancor Company
Income Statement
For the Month of August
Sales revenue
$912,200
Cost of goods sold
601,920
Gross margin
310,280
Less:
Selling expense
164,160
Administrative expense
63,840
Operating income
$ 82,280
Required:
A.
Calculate the sales revenue percent
B.
Calculate the cost of goods sold percent
C.
Calculate the gross margin percent
D.
Calculate the selling expense percent
E.
Calculate the administrative expense percent
F.
Calculate the operating income percent
Purchases of materials
Materials inventory (beginning balance)
750
220
Materials inventory (ending balance)
Materials used
4,750
3,370
Direct labor
7,000
4,250
Overhead
Total manufacturing costs
14,500
9,620
Work in process inventory, (beginning balance)
1,200
1,230
Work in process inventory, (ending balance)
Cost of goods manufactured
$14,600
$10,200
20. Extrema Company supplied the following data at the end of the current year.
Finished goods inventory, Jan 1.
$ 12,000
Finished goods inventory, Dec. 31
7,500
Cost of goods manufactured
152,380
Sales revenue
212,000
Sales commissions
19,080
Research and development costs
15,900
Required:
A.
Calculate the cost of goods sold percent
B.
Calculate the gross margin percent
C.
Calculate the selling expense percent
D.
Calculate the administrative expense percent
E.
Calculate the operating income percent
A.
Cost of goods manufactured
Finished goods inventory, 1/1
12,000
Finished goods inventory, 12/31
Cost of goods sold
156,880
Sales revenue
Cost of goods sold
Gross margin
55,120
Less:
Selling expense
19,080
Administrative expense
Operating income
$ 20,140
A.
156,880/212,000 = 74%
B.
C.
D.
E.
A.
912,000/912,000 = 100%
B.
601,920/912,000 = 66%
C.
310,280/912,000 = 34%
D.
164,160/912,000 = 18%
E.
21. Rizzuto Company supplied the following information for the month of January.
Cost of Goods Sold percent
62%
Selling Expense percent
6%
Administrative expense
13%
Required: Reconstruct Rizzuto’s income statement for January assuming that their total sales revenue
for the month equaled $500,000.
Sales revenue
Cost of goods sold (500,000 62%)
Gross margin (500,000 38%)
Less:
Selling expense (500,000 6%)
Administrative expense (500,000 13%)
Operating income
22. Cashman Company supplied the following information for the month of December.
Operating income percent
10.5%
Gross margin percent
30%
Required: Solve for the following amounts assuming that Cashman Company’s operating income in
December was $44,100.
A.
Sales revenue
B.
Cost of good sold
C.
Total Selling and administrative expenses
A.
Sales Revenue = $44,100/.105 = 420,000
Cost of goods sold = 420,000 .70 = $294,000
Gross margin (420,000 .30)
Less: Selling and administrative expense
Operating income
23. Wapato Company produces a product with the following per unit costs.
Direct materials
$17
Direct labor
11
Overhead
12
Last year, Wapato produced and sold 3,000 units at a sales price of $80 each. Total selling and
administrative expenses were $25,000.
Required: Solve for the following:
A.
Total cost of goods sold for last year
B.
Operating income for last year
C.
Total gross margin for last year
D.
Prime cost per unit
24. Tesco Company showed the following costs for last month:
Direct materials
$40,000
Direct labor
35,000
Overhead
52,000
Selling expense
17,000
Administrative expense
12,000
Last month, Tesco produced and sold 20,000 units at a sales price per unit of $18. Assume no
beginning or ending inventory balances for work in process and finished goods inventory.
Required: Solve for the following amounts.
A.
Total product cost for last month
B.
Unit product cost for last month
C.
Total period costs
D.
Gross margin for last month
E.
Operating income for last month
(17 + 11 + 12) 3,000 = $120,000
Sales revenue (3,000 80)
Cost of goods sold
Gross margin
120,000
Less:
Selling and administrative expenses
Operating income
D.
17 + 11 = $28
25. Stabler Company, a manufacturing firm, has provided the following information for the month of
May:
Factory supplies used
22,000
Depreciation on factory building
10,000
Commissions for sales personnel
32,000
Salary of company CFO
9,000
Factory janitorial costs
3,000
Research and development
5,000
Depreciation on corporate office
8,500
Advertising costs
2,500
Direct labor cost
40,000
Purchases of raw materials
15,000
Finished goods inventory units, May 1
4,000
Finished goods inventory units, May 31
6,500
Finished goods inventory, May 1
36,000
Finished goods inventory, May 31
59,865
Work in process inventory, May 1
7,500
Work in process inventory, May 31
3,300
Materials inventory, May 1
2,100
Materials inventory, May 31
4,200
Required:
A.
Prepare a Statement of Cost of Goods Manufactured.
B.
Calculate the cost of one unit assuming 10,000 units were completed during May.
C.
Prepare a Statement of Cost of Goods Sold.
D.
Calculate the number of units that were sold during May.
E.
Prepare an Income Statement assuming the sales price per unit is $35.
Materials Inventory, May 1
Purchases of materials
Materials Inventory, May 31
Materials used
Direct Labor
Overhead
Total manufacturing costs
Work in Process Inventory, May 1
Work in Process Inventory, May 31
Cost of Goods Manufactured
Cost of Goods Manufactured
Finished Goods Inventory, May 1
Finished Goods Inventory, May 31
Cost of Goods Sold
ESSAY
1. What is the difference between a period cost and a product cost?
2. List and describe the three categories of manufacturing costs.
3. Explain the difference between a cost that is included in valuing inventory and a cost that is not
included in valuing inventory.
4. Describe the purpose of the three inventory accounts used by a manufacturer.
5. What is the difference between total manufacturing costs and cost of goods manufactured?
6. You are the accounting manager at Falcon Inc. You just hired a new staff accountant to assist you in
breaking out costs into their appropriate classifications. The staff accountant asks you why cost
classification is important.
How would you respond?