212. 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
$152,380
Finished goods inventory, 1/1
12,000
Finished goods inventory, 12/31
(7,500)
Cost of goods sold
156,880
Sales revenue
$212,000
Cost of goods sold
156,880
Gross margin
55,120
Less:
Selling expense
19,080
Administrative expense
15,900
Operating income
$ 20,140
A.
156,880/212,000 = 74%
B.
55,120/212,000 = 26%
C.
19,080/212,000 = 9%
D.
15,900/212,000 = 7.5%
E.
20,140/212,000 = 9.5%
213. Rizzuto Company supplied the following information for the month of January.
Cost of Goods Sold percent
Selling Expense percent
Administrative expense
Required: Reconstruct Rizzuto’s income statement for January assuming that their total sales revenue for the month equaled $500,000.
214. Cashman Company supplied the following information for the month of December.
Operating income percent
Gross margin percent
Required: Solve for the following amounts assuming that Cashman Company’s operating income in December was $44,100.
A.
Sales revenue
B.
Cost of goods sold
C.
Total Selling and administrative expenses
Sales Revenue = $44,100/.105 = 420,000
B.
Cost of goods sold = 420,000 ´ .70 = $294,000
Gross margin (420,000 ´ .30)
126,000
Less: Selling and administrative expense
81,900
Operating income
44,100
Sales revenue
$500,000
Cost of goods sold (500,000 ´ 62%)
310,000
Gross margin (500,000 ´ 38%)
190,000
Less:
Selling expense (500,000 ´ 6%)
30,000
Administrative expense (500,000 ´ 13%)
65,000
Operating income
95.000
215. Wapato Company produces a product with the following per unit costs.
Direct materials
Direct labor
Overhead
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
A.
(17 + 11 + 12) ´ 3,000 = $120,000
B. & C.
Sales revenue (3,000 ´ 80)
$240,000
Cost of goods sold
120,000
Gross margin
120,000
Less:
Selling and administrative expenses
25,000
Operating income
$ 95,000
D.
17 + 11 = $28
216. 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
A.
40,000 + 35,000 + 52,000 = $127,000
B.
127,000/20,000 = $6.35
17,000 + 12,000 = $29,000
D & E.
Sales revenue (20,000 ´ $18)
360,000
Cost of goods sold
127,000
Gross margin
233,000
Less:
Selling expense
17,000
Administrative expense
12,000
Operating income
$204,000
217. 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, May 1
4,000
Finished goods inventory, May 31
6,500
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
There were 400 units in beginning finished goods inventory and 720 units in ending finished goods inventory.
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.
D.
Materials Inventory, May 1
$ 2,100
Purchases of materials
15,000
Materials Inventory, May 31
(4,200)
Materials used
$ 12,900
Direct Labor
40,000
Overhead
35,000
Total manufacturing costs
87,900
Work in Process Inventory, May 1
7,500
Work in Process Inventory, May 31
(3,300)
Cost of Goods Manufactured
$92,100
Cost of Goods Manufactured
$92,100
Finished Goods Inventory, May 1
4,000
218. The Blanchett Company manufactures fishing rods. Last year, direct materials costing $516,000 were put
into production. Direct labor of $430,000 was incurred and overhead equaled $645,000. The company had
operating income for the year of $58,000 and manufactured and sold 86,000 fishing rods at a sales price of $21
per unit. Assume that there were no beginning or ending inventory balances in the work- in– process and
finished goods inventory accounts.
Required:
A.
Compute the per-unit product cost.
B.
Compute the per-unit prime cost.
C.
Compute the per-unit conversion cost.
D.
Compute the gross margin for the year.
E.
Compute the selling and administrative expenses for the year.
F.
Assume production amounted to 86,000 fishing rods and 80,000 were sold. Compute cost of goods sold.
G.
Assume production amounted to 86,000 fishing rods and 80,000 were sold. Compute the balance in ending finished goods inventory.
Finished goods inventory, May 1
400
Units finished during May
10,000
Finished goods inventory, May 31
(720)
Units sold during May
9,680
Stabler Company
Income Statement
For the Month of May
Sales revenue (9,680 x 35)
338,800
Cost of goods sold
89,600
Gross margin
249,200
Less:
Selling expense
Commissions
32,000
Advertising
2,500
34,500
Administrative expense
Salary of CFO
9,000
Research and development
5,000
Depreciation on corporate office
8,500
22,500
Operating income
192,200
.
219. The Butchart Company manufactures microwave ovens. Last year, the per-unit product cost was $56, the
per-unit prime cost was $34, and the per-unit conversion cost was $42. Cost of goods sold for the year was
$560,000 and the sale price per unit was $100. In addition, direct labor costs of $200,000 and selling and
administrative expenses of $240,000 were incurred.
Required:
A.
Calculate how many units were sold last year.
B.
Compute the cost of direct materials used.
C.
Compute the cost of overhead.
D.
Compute the gross margin for the year.
E.
Calculate operating income.
A.
Cost of goods sold
$560,000/$56 = 10,000 units
D.
Sales revenue (10,000 ´ $100)
$1,000,000
Cost of goods sold
560,000
Gross margin
440,000
Gross margin
$ 440,000
Less: Sell. and admin.
240,000
Operating income
200,000
220. Picture It Inc. manufactures customized wooden frames. The direct materials needed to construct the
frames are wood, glass and cardboard. Picture It has 22 employees who work a 40 hour work week and are
each paid $17 per hour. The company produced and sold 900 frames in the month of September.
During the month of September the following purchases were made to produce the 900 frames:
Wood- 4,000 ft. at $1.20/ft.
Glass- 400 pieces at $5.60/piece
Cardboard- 500 pieces at $.50/piece
Required:
1. Calculate the total product cost for the month. Assume that all employees worked four full weeks in
September and that the company incurred $55,000 in overhead costs.
2. Calculate the per unit cost.
3. Calculate the gross margin for the month of September assuming that the company sells each frame for
$250.
221. You decide
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?
222. You decide
You have been working as a staff accountant at Sanborn Industries for three months. Mr. Jones, the accounting
manager as well as your boss, has informed you that he has decided to change vendors for the company’s office
supplies. He notifies you that your company will now be utilizing the store owned by his best friend. Mr.
Jones is hopeful that this will bring in a significant profit for his friend’s business possibly preventing the
closing of his store. You receive the first invoice from that store and realize that the prices are nearly double
the amount that the company was paying when using a large retail chain.
What should you do about the situation?
223. What is the difference between a period cost and a product cost?
224. List and describe the three categories of manufacturing costs.
225. Explain the difference between a cost that is included in valuing inventory and a cost that is not included in
valuing inventory.
226. What is the difference between total manufacturing costs and cost of goods manufactured?
227. Describe the purpose of the three inventory accounts used by a manufacturer.