Exercise 14–11 (concluded)
Manufacturing Business
PRECISION MANUFACTURING
Computation of Cost of Goods Sold
Cost of goods sold
Finished goods inventory, beginning …………………………..
$ 450,000
Cost of goods manufactured ………………………………………….
900,000
Goods available for sale ………………………………………………..
Beginning Inventory 450,000
Cost of Goods Manufactured 900,000
Goods available for sale 1,350,000
975,000 Cost of Goods Sold
Ending Inventory 375,000
Finished Goods Inventory
Exercise 14-12 (25 minutes)
Account
Balance
Sheet
Income
Statement
Schedule of
COGM
Overhead
Report
Accounts receivable ……………………….
✓
Beginning finished goods inventory
✓
Computer supplies used in office …….
✓
Depreciation expense—Factory
building………………………………………..
✓
Depreciation expense—Office
building………………………………………..
✓
Wages for assembly workers …………..
Ending work in process inventory ……
✓
Factory maintenance wages …………….
Property taxes on factory building …..
Raw materials purchases ………………..
Sales ………………………………………………
✓
Exercise 14-13 (25 minutes)
DELRAY MFG.
Schedule of Cost of Goods Manufactured
For Year Ended December 31
Direct materials
Raw materials inventory, beginning …………………………..
$ 37,000
Raw materials purchases …………………………………………….
175,600
Raw materials available for use …………………………………..
212,600
Direct materials used ………………………………………………….
$169,900
225,000
Factory supplies used ………………………………………………….
Indirect labor ……………………………………………………………….
47,000
Repairs—Factory equipment ………………………………………..
5,250
Rent cost of factory building ………………………………………..
57,000
Total factory overhead costs ……………………………………….
127,090
Total manufacturing costs ……………………………………………..
521,990
Work in process inventory, beginning …………………………..
53,900
Total cost of work in process …………………………………………
575,890
Less work in process inventory, ending ………………………….
Exercise 14-14 (20 minutes)
DELRAY MFG.
Income Statement
For Year Ended December 31
Sales ………………………………………………………………………………
$1,250,000
Cost of goods sold
Finished goods inventory, beginning …………………………..
$ 62,750
Cost of goods manufactured ………………………………………..
534,390
Cost of goods available for sale ……………………………………
597,140
Less finished goods inventory, ending …………………………..
67,300
Cost of goods sold ………………………………………………………
529,840
Gross profit ……………………………………………………………………
Operating expenses
Advertising expense …………………………………………………….
General and administrative expenses …………………………..
129,300
Total operating expenses …………………………………………….
223,300
Exercise 14-15 (25 minutes)
Beck Manufacturing
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2019
Direct materials ………………………………………………………………………….
$ 46,500
Direct labor ……………………………………………………………………………….
27,500
Factory overhead costs ………………………………………………………………
55,000
Total manufacturing costs ……………………………………………………….
129,000
Add work in process, beginning ………………………………………………….
14,000
Total cost of work in process ………………………………………………………
143,000
Less work in process, ending ……………………………………………………..
12,000
Beck Manufacturing
Partial Income Statement
For Year Ended December 31, 2019
Cost of goods sold
Finished goods inventory, beginning …………………………..……………
$ 16,000
Cost of goods manufactured …………………………………………………….
131,000
Goods available for sale ……………………………………………………….
Less finished goods inventory, ending ……………………………………..
Cost of goods sold ……………………………………………………………………
Exercise 14-16 (15 minutes)
Direct materials used
in production
$502,500
Factory overhead
Direct labor used
process inventory
process
Ending finished
goods inventory
$139,950
Finished goods sold
Beginning finished
goods inventory
Finished goods
available for sale
Ending raw
materials inventory
$175,000
Beginning raw
materials inventory
$145,500
Raw materials available
for use in production
$677,500
Raw materials
purchases
$532,000
Production
Materials
Activity
Exercise 14–17 (10 minutes)
Exercise 14-18 (10 minutes)
1. Sales revenue
Profit
2. Coffee purchases from ethical growers
People
3. Reduced water consumption
Planet
Profit
5. Increased energy from renewable sources
Planet
6. Discontinued working with some factories
People
Exercise 14-19 (10 minutes)
1. Sales revenue
Profit
2. Women in management positions
People
3. Invested in career programs
People
4. Operating cash flows
Profit
5. Awards for LGBT workforce
People
6. Recycling efforts
Planet
PROBLEM SET A
Problem 14-1A (45 minutes)
Part 1 Cost classification and amounts
Costs
Variable
Fixed
Product
Period
1.
Plastic for casing—$17,000 ………………
$17,000
$17,000
2.
Wages of assembly workers—$82,000 …
82,000
82,000
3.
Property taxes on factory—$5,000 …….
$ 5,000
5,000
4.
Accounting staff salaries—$35,000 ……
35,000
$35,000
7.
units sold
units sold
10.
Machinery depreciation, straight-
line—$40,000 ……………………………..
40,000
40,000
Part 2
TrueBeat
Calculation of Manufacturing Cost per Drum Set
Item
Total cost
(at 1,000 units)
Per unit cost
(Total / 1,000)
Variable production costs
Plastic for casing
$ 17,000
$ 17
Wages of assembly workers
82,000
82
Drum stands
26,000
26
Total variable production costs
125,000
125
Fixed production costs
Property taxes on factory
Annual fee for maintenance service
Machinery depreciation
Total fixed production costs
55,000
55
Total production cost
$180,000
$180
Problem 14-1A (continued)
Part 3
If 1,200 drum sets are produced, we would expect the cost of the plastic for
the casings to increase to $20,400 (1,200 drum sets x $17/set), but the cost
per unit will stay at $17 per drum set. Variable costs increase in total as the
number of units produced increases, but the unit cost remains constant.
Part 4
Problem 14-2A (30 minutes)
Costs
Product
Cost
Dir.
Mtls.
Dir.
Labor
Over-
head
Period
Cost
Selling
Gen. &
Admin
Advertising expense
X
X
Depr. expense-Office equip.
X
X
Depr. expense-Selling equip.
X
X
Depr. expense-Factory equip.
X
X
Factory supervision
X
X
Factory supplies used (indirect mtls)
X
X
Factory utilities
X
X
Direct labor
X
X
Indirect labor
X
X
Misc. production costs
X
X
Office salaries expense
X
X
Raw materials purchases (direct mtls)
X
X
Rent expense-Office space
X
X
Rent expense-Selling space
X
X
Rent expense-Factory bldg.
X
X
Maint. expense-Factory equip.
X
X
Sales salaries expense
X
X
Problem 14-3A (75 minutes)
Part 1
LEONE COMPANY
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2019
Direct materials
Raw materials inventory, December 31, 2018 ……….
$ 166,850
Raw materials purchases …………………………………….
925,000
Raw materials available for use …………………………..
1,091,850
Less raw materials inventory, December 31, 2019 …..
182,000
Direct materials used ………………………………………….
$ 909,850
Direct labor ……………………………………………………………
675,480
Factory overhead
Depreciation expense—Factory equipment ………….
33,550
Factory supervision …………………………………………….
102,600
Factory supplies used …………………………………………
7,350
Factory utilities …………………………………………………..
33,000
Indirect labor ………………………………………………………
56,875
Miscellaneous production costs ………………………….
8,425
Rent expense—Factory building ………………………….
76,800
Maintenance expense—Factory equipment ………….
Total factory overhead costs ……………………………….
Total manufacturing costs ……………………………………..
Total cost of work in process …………………………………
Problem 14-3A (Continued)
Part 2
LEONE COMPANY
Income Statement
For Year Ended December 31, 2019
Sales …………………………..…………………………………………
$4,462,500
Cost of goods sold
Finished goods inventory, December 31, 2018………
$ 167,350
Cost of goods manufactured …………………………..……
1,935,650
Goods available for sale ………………………………………
2,103,000
Less finished goods inventory, December 31, 2019 …….
136,490
Cost of goods sold ………………………………………………
1,966,510
Gross profit from sales ………………………………………….
2,495,990
Operating expenses
Selling expenses
Advertising expense …………………………………………..
28,750
Depreciation expense—Selling equipment ………….
8,600
Rent expense—Selling space …………………………..
26,100
Sales salaries expense ……………………………………….
392,560
Total selling expenses ……………………………………….
General and administrative expenses
Depreciation expense—Office equipment ……………
7,250
Office salaries expense ………………………………………
63,000
Rent expense—Office space ………………………………
22,000
Total general and administrative expenses …………
92,250
Total operating expenses …………………………………….
548,260
1,947,730
Income taxes expense ……………………………………………
233,725
Problem 14-3A (Continued)
Part 3
Raw
Materials
Finished
Goods
Cost of raw materials used ……………………………………………..
$909,850
Cost of goods sold ……………………………………………………….
$1,966,510
Beginning inventory ……………………………………………………….
$166,850
$ 167,350
Ending inventory……………………………………………………….
182,000
136,490
Total beginning plus ending inventory …………………………..
$348,850
$ 303,840
Average inventory (Total / 2) …………………………………………..
$174,425
$ 151,920
Inventory turnover (COGS* / Average inventory) ……………..
5.2
12.9
Days’ sales in inventory [(Ending inv./COGS*) x 365] ………
73.0
25.3
* To calculate the turnover and days’ sales in inventory for raw materials, use raw materials used
rather than cost of goods sold.
Discussion: The inventory turnover ratio for the raw materials inventory is
significantly lower than the turnover ratio for finished goods.
One reason for the difference could be that source of supply for raw materials
is relatively undependable, so that management believes it is necessary to
carry a larger inventory to sustain operations through periods when the
Problem 14-4A (20 minutes)
1.
Units and dollar amounts of raw materials inventory in heels
Units
$/unit Total
Beginning inventory 1,200 $8 $9,600
Purchases during the year 35,000 8 280,000
Inventory available for production 36,200 8 289,600
Less: Inventory transferred into production 33,200 8 265,600
Ending inventory 3,000 8 $24,000
Problem 14-5A (30 minutes)
Part 1
MERCHANDISING BUSINESS
MUSIC WORLD RETAIL
Cost of Goods Sold For The Year
Cost of goods sold
Merchandise inventory, beginning ………………………………………..
$ 200,000
Merchandise purchases ……………………………………………………….
300,000
Goods available for sale ……………………………………………………….
500,000
Less merchandise inventory, ending …………………………………….
175,000
Cost of goods sold ……………………………………………………………….
$ 325,000
MANUFACTURING BUSINESS
WAVE–BOARD MFG.
Cost of Goods Sold For The Year
Cost of goods sold
Finished goods inventory, beginning …………………………………….
Cost of goods manufactured …………………………………………………
Goods available for sale ……………………………………………………….
Less finished goods inventory, ending ………………………………….
Cost of goods sold ……………………………………………………………….
Part 2
PROBLEM SET B
Problem 14-1B (45 minutes)
Part 1 Cost classification and amounts
Cost by Behavior
Cost by Function
Costs
2.
Wages of assembly
workers—$30,000 ……………………..
4.
Systems staff salary—
6.
Cost of office equipment
rent—$1,050 …………………………..
1,050
1,050
7.
Upper management
salaries—$120,000 …………………….
120,000
120,000
8.
Annual fees for cleaning
service—$4,520 ………………………..
4,520
4,520
9.
Sales commissions—$0.50
per BD …………………………..
$0.50 x #
BDs sold
$0.50 x #
BDs sold
10.
Machinery depreciation,
straight-line—$18,000 ………………..
18,000
18,000