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Current assets
Cash $32,000
Accounts Receivable 27,000
Inventories
June 30, 2017
Assets
P19-4A Solution to additional question
1. Assume that in preparing the cost of goods manufactured schedule, several errors were made. Raw materials purchases,
sales revenue and factory depreciation should have been $106,400, $584,000 and $18,000 respectively. Show the impact
of these changes on the cost of goods manufactured schedule, income statement and balance sheet.
(a) Prepare a cost of goods manufactured schedule. (Assume all raw materials used were direct materials.)
Work in process inventory, July 1, 2016 $19,800
Direct materials
Raw materials inventory, July 1, 2016
$48,000
Manufacturing overhead
Plant manager's salary $58,000
Factory utilities 27,600
Indirect labor 24,460
(b) Prepare an income statement through gross profit.
Sales Revenues
Sales Revenue $584,000
(c ) Prepare the current assets section of the balance sheet at June 30, 2017.
Current assets
CLARKSON COMPANY
Cost of Goods Manufactured Schedule
For the Year Ended June 30, 2017
CLARKSON COMPANY
(Partial) Income Statement
For the Year Ended June 30, 2017
CLARKSON COMPANY
(Partial) Balance Sheet
June 30, 2017
Assets
Cash $32,000
Accounts Receivable 27,000
Inventories
P19-5A Prepare a cost of goods manufactured schedule and a correct income statement
Empire Company is a manufacturer of smart phones. Its controller resigned in October 2017.
An inexperienced assistant accountant has prepared the following income statement for
the month of October 2017.
Sales Revenue $780,000
Less: Operating Expenses
Raw materials purchases $264,000
Direct labor costs 190,000
Advertising expense 90,000
Selling and administrative salaries 75,000
Rent on factory facilities 60,000
Depreciation on sales equipment 45,000
Depreciation on factory equipment 31,000
Indirect labor cost 28,000
Utilities expense 12,000
Insurance expense 8,000 803,000
Net loss ($23,000)
Prior to October 2017, the company had been profitable every month. The company's president is concerned
about the accuracy of the income statement. As her friend, you have been asked to review the income statement
and make necessary corrections. After examining other manufacturing cost data, you have acquired additional
information as follows.
1. Inventory balances at the beginning and end of October were:
October 1 October 31
Raw materials $18,000 $29,000
Work in process 20,000 14,000
Finished goods 30,000 50,000
2. Only 75% of the utilities expense and 60% of the insurance expense apply to factory
operations. The remaining amounts should be charged to selling and administrative
activities.
Instructions
(a) Prepare a schedule of cost of goods manufactured for October 2017.
(b) Prepare a correct income statement for October 2017.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
(a) Prepare a schedule of cost of goods manufactured for October 2017.
Work in process inventory, October 1 Value
Direct materials
Raw materials inventory, October 1 Value
Raw materials purchases Value
Total raw materials available for use ?
For the Month Ended October 31, 2017
EMPIRE COMPANY
income Statement
For the Month Ended October 31, 2017
EMPIRE COMPANY
Cost of Goods Manufactured Schedule
Less: Raw materials inventory, October 31 Value
Direct materials used ?
Direct labor Value
Manufacturing overhead
Factory facility rent Value
Depreciation on factory equipment Value
Indirect labor Value
Factory utilities ?
Factory insurance ?
Total manufacturing overhead ?
Total manufacturing costs ?
Total cost of work in process ?
Less: Work in process, October 31 Value
Cost of goods manufactured ?
(b) Prepare a correct income statement for October 2017.
Sales Revenue Value
Cost of goods sold
Finished goods inventory, October 1 Value
Cost of goods manufactured ?
Cost of goods available for sale ?
Less: Finished goods inventory, October 31 Value
Cost of goods sold ?
Gross profit ?
Operating expenses
Advertising expense Value
Selling and administrative salaries Value
Depreciation expense - sales equipment Value
Insurance expense ?
Utilities expense ?
Total operating expenses ?
Net income ?
After you have completed P19-5A, consider the additional question.
1. Assume that utilities expense and insurance expense changed to $15,000 and $9,000 respectively. Also assume
that 80% of utilities expense and 65% of insurance expense apply to factory operations. Show the impact of these
changes on the cost of goods manufactured schedule and the income statement.
For the Month Ended October 31, 2017
EMPIRE COMPANY
Income Statement
P19-5A Solution
(a) Prepare a schedule of cost of goods manufactured for October 2017.
Work in process inventory, October 1 $20,000
Direct materials
Raw materials inventory, October 1 $18,000
Manufacturing overhead
Factory facility rent $60,000
Depreciation on factory equipment 31,000
(b) Prepare a correct income statement for October 2017.
Sales Revenue $780,000
Cost of goods sold
Finished goods inventory, October 1 $30,000
Operating expenses
Advertising expense 90,000
Selling and administrative salaries 75,000
For the Month Ended October 31, 2017
Income Statement
EMPIRE COMPANY
EMPIRE COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended October 31, 2017
P19-5A Solution to additional question
1. Assume that utilities expense and insurance expense changed to $15,000 and $9,000 respectively. Also assume
that 80% of utilities expense and 65% of insurance expense apply to factory operations. Show the impact of these
changes on the cost of goods manufactured schedule and the income statement.
(a) Prepare a schedule of cost of goods manufactured for October 2017.
Work in process inventory, October 1 $20,000
Direct materials
Raw materials inventory, October 1 $18,000
Raw materials purchases 264,000
Manufacturing overhead
Factory facility rent $60,000
Depreciation on factory equipment 31,000
Indirect labor 28,000
(b) Prepare a correct income statement for October 2017.
Sales Revenue $780,000
Cost of goods sold
Finished goods inventory, October 1 $30,000
Cost of goods manufactured 585,850
Income Statement
For the Month Ended October 31, 2017
EMPIRE COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended October 31, 2017
EMPIRE COMPANY
CD19 -Excel Tutorial
Mike Cichanowski founded Wenonah Canoe and later purchased Current designs, a company that designs and
manufactures kayaks. The kayak-manufacturing facility is located just a few minutes from the canoe company's
headquarters in Winona, Minnesota.
Current Designs makes kayaks using two different processes. (See www.cdkayak.com/craftsmanship/index.php
for the details of each method.) The rotational molding process uses high temperature to melt polyethylene powder
in a closed rotating metal mold to produce a complete kayak hull and deck in a single piece. These kayaks are less
labor-intensive and less expensive for the company to produce and sell.
Its other kayaks use the vacuum-bagged composite lamination process (which we will refer to as the composite
process). Layers of fiberglass or Kevlar® are carefully placed by hand in a mold and are bonded with resin. Then, a
high-pressure vacuum is used to eliminate any excess resin that would otherwise add weight and reduce strength
of the finished kayak. These kayaks require a great deal of skilled labor as each boat is individually finished. The
exquisite finish of the vacuum-bagged composite kayaks gave rise to Current Designs' tag line, "A work of art, made
for life."
Current Designs has the following managers:
Mike Cichanowski, CEO
Diane Buswell, Controller
Deb Welch, Purchasing Manager
Bill Johnson, Sales Manager
Dave Thill, Kayak Plant Manager
Rick Thrune, Production Manager for Composite Kayaks
Instructions
(a) What are the primary information needs of each manager?
(b) Name one special-purpose management accounting report that could be designed for each manager:
Include the name of the report, the information it would contain, and how frequently it should be issued.
(c ) When Diane Buswell, controller for Current Designs, reviewed the accounting records for a recent period, she noted
the following items. Classify each item as a product cost or a period cost. If an item is a product cost, note if it is a direct
materials, direct labor, or manufacturing overhead item.
Direct Direct Mfg. Period
Payee Purpose Materials Labor Overhead Costs
Winona Agency
Property insurance for the
manufacturing plant
Bill Johnson (sales
manager)
Payroll check - payment to
sales manager
Xcel Energy
Electricity for manufacturing
plant
Winona Printing Price lists for salespeople
Jim Kaiser (sales
representative)
Sales commissions
Dave Thill (plant
manager)
Payroll check - payment to
plant manager
Dana Schultz
(kayak assembler)
Payroll check - payment to
kayak assembler
Composite One
Bagging film used when
kayaks are assembled; it is
discarded after use.
Fastenal
Shop supplies - brooms, paper
towels, etc.
Ravago
Polyethylene powder which is
the main ingredient for the
rotational molded kayaks
Product Costs
Winona County
Property taxes on
manufacturing plant
North American
Composites
Kevlar ® fabric for composite
kayaks
Waste
Management
Trash disposal for the
company office building
None
Journal entry to record
depreciation of manufacturing
equipment
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .
(a) What are the primary information needs of each manager?
(b) Name one special-purpose management accounting report that could be designed for each manager.
Include the name of the report, the information it would contain, and how frequently it should be issued.
Manager Report content
Report
frequency
Mike Cichanowski
Diane Buswell
Deb Welch
Bill Johnson
Dave Thill
Rick Thrune
(c ) When Diane Buswell, controller for Current Designs, reviewed the accounting records for a recent period, she noted the following items.
Classify each item as a product cost or a period cost. If a cost is a product cost, note if it is a direct materials, direct labor, or manufacturing
overhead item by placing an "X" in the appropriate box below.
Direct Direct Mfg. Period
Payee Purpose Materials Labor Overhead Costs
Winona Agency
Property insurance for the
manufacturing plant
Bill Johnson (sales
manager)
Payroll check - payment to
sales manager
Xcel Energy
Electricity for manufacturing
plant
Product Costs
Name of report
Response:
Winona Printing Price lists for salespeople
Jim Kaiser (sales
representative)
Sales commissions
Dave Thill (plant
manager)
Payroll check - payment to
plant manager
Dana Schultz
(kayak assembler)
Payroll check - payment to
kayak assembler
Composite One
Bagging film used when
kayaks are assembled; it is
discarded after use.
Fastenal
Shop supplies - brooms, paper
towels, etc.
Ravago
Polyethylene powder which is
the main ingredient for the
rotational molded kayaks.
Winona County
Property taxes on
manufacturing plant
North American
Composites
Kevlar ® fabric for composite
kayaks
Waste
Management
Trash disposal for the
company office building
None
Journal entry to record
depreciation of manufacturing
equipment
CD19 - Solution
(a) What are the primary information needs of each manager?
(b) Name one special-purpose management accounting report that could be designed for each manager.
Include the name of the report, the information it would contain, and how frequently it should be issued.
Manager Name of report Report content Report frequency
Mike Cichanowski
Analysis of proposed new
product line
Projected revenues
and expenses for a
possible new product
line.
As needed and
requested
Bill Johnson Sales Summary
Sales by product line
and by customer.
Monthly or weekly
Direct materials, direct
labor, and
(c ) When Diane Buswell, controller for Current Designs, reviewed the accounting records for a recent period, she noted the following
Classify each item as a product cost or a period cost. If a cost is a product cost, note if it is a direct materials, direct labor, or ma
overhead item by placing an "X" in the appropriate box below.
Product Costs
Response:
Mike Cichanowski, CEO, needs to know the overall financial picture of the company. He
also needs to have a general picture of sales by territory and product line, and of cost
per unit by product line.
Diane Buswell, Controller, needs all accounting-related information.
Deb Welch, Purchasing Manager, needs to know the costs of the components for each
product.
Bill Johnson, Sales Manager, needs to know sales by territory and product line.
Dave Thill, Kayak Plant Manager, needs to know all the costs of producting each type of
kayak.
Rick Thrune, Production Manager for Composite Kayaks, needs to know the costs
related to the composite kayak production.
Direct Direct Mfg. Period
Payee Purpose Materials Labor Overhead Costs
Winona Agency
Property insurance for the
manufacturing plant
X
Bill Johnson (sales
manager)
Payroll check - payment to
sales manager
X
Jim Kaiser (sales
representative)
Sales commissions X
Dave Thill (plant
manager)
Payroll check - payment to
plant manager
X
Fastenal
Shop supplies - brooms, paper
towels, etc.
X
Ravago
Polyethylene powder which is
the main ingredient for the
X
