Problem 2.28 Cost Assignment Methods Brody Company makes industrial cleaning sol

Question

Problem 2.28
Cost Assignment Methods

Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water are mixed together and then bottled in 10-gallon drums. Brody provided the following information for last year:

Last year, Brody completed 100,000 units. Sales revenue equaled $1,200,000, and Brody paid a sales commission of 5 percent of sales.

Required:

1. Calculate the direct materials used in production for last year.

$

2. Calculate total prime cost.

$

3. Calculate total conversion cost.

$

4. Prepare a cost of goods manufactured statement for last year.

Brody Company

Statement of Cost of Goods Manufactured

For Last Year

  

$  

  

  

  

  

Total manufacturing cost

$  

  

  

  

  

  

$  

Calculate the unit product cost. If required, round your answer to the nearest cent.

$

5. Prepare a cost of goods sold statement for last year.

Brody Company

Statement of Cost of Goods Sold

For Last Year

  

$  

  

  

  

  

  

$  

6. Prepare an income statement for last year. Show the percentage of sales that each line item represents. When required, round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

Brody Company

Income Statement

For Last Year

Percent

  

$  

  %

  

  

  %

  

$  

  %

Less: Operating expenses

  

  

  %

  

  

  %

  

$  

  %

Hide

4. Prepare a cost of goods manufactured statement for last year.

Brody Company

Statement of Cost of Goods Manufactured

For Last Year

  

$  

  

  

  

  

Total manufacturing cost

$  

  

  

  

  

  

$  

Explanation / Answer

Answer 4 Answer 1 Brody Company The direct materials used in production for last year. Statement of cost of Goods Manufactured Beginning Raw Materials $124,000.00 For last Year Add : Purchases $250,000.00 Direct Material Consumed $272,000.00 Less : Ending Raw Materials $102,000.00 Direct Labour $140,000.00 Direct Materials Used $272,000.00 Factory Overheads $300,000.00 Total Manufacturing Cost $712,000.00 Answer 2 Add : Beginning WIP $124,000.00 Total Prime Cost Less : Ending WIP $130,000.00 Direct Material Used $272,000.00 Cost of goods Manufactured $706,000.00 Direct Labor $140,000.00 Total Prime Cost $412,000.00 Unit product cost = Cost of goods manufactured / No.of units produced Unit product cost = $706000 / 100000 units = $7.06 per unit Answer 3 Total Conversion cost Answer 5 Prime Cost $412,000.00 Brody Company Add : Factory Overheads $300,000.00 Statement of cost of Goods sold Total Conversion cost $712,000.00 For last Year Cost of goods Manufactured $706,000.00 Factory Overheads Add : Beginning Finished Goods $84,000.00 Depreciation on Factory Building $30,000.00 Less : Ending Finished Goods $82,000.00 Depreciation on Factory equipment $45,000.00 Cost of goods sold $708,000.00 Factory Insurance $15,000.00 Property Taxes - Factory $20,000.00 Answer 6 Utilities for Factory $34,000.00 Brody Company Indirect Labor salaries $156,000.00 Income Statement Total Factory Overheads $300,000.00 For last Year Sales $1,200,000.00 100.00% Less : Cost of goods sold $708,000.00 59.00% Gross Margin $492,000.00 41.00% Less : Operating Expenses Depreciation on Headquarters building $50,000.00 Property Tax - Headquarters $18,000.00 Utilities for sales office $1,800.00 Administrative salaries $150,000.00 sales office salaries $90,000.00 Sales commission (5% of sales) $60,000.00 Total Operating Expenses $369,800.00 30.82% Net Operating Income $122,200.00 10.18%

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