Given the following data for 2017: Administrative costs $35,000 Current liabilit

Question

Given the following data for 2017:

Administrative costs                                                   $35,000

Current liabilities                                                          18,000

Building depreciation (80% for plant)                       25,000

Indirect materials and supplies                                       4,000

Sales commission expenses                                         12,000

Accounts receivable                                                     15,000

Direct materials inventory, Jan 1, 2017                        15,000

Direct labor                                                                 32,000

Direct materials inventory, Dec 31, 2017                    16,000

Finished goods inventory, Jan 1, 2017                           8,000

Finished goods inventory, Dec 31, 2017                        7,000

Materials purchases                                                    20,000

Work in process inventory, Dec 31, 2017                    10,000

Supervisory and indirect labor                                   12,000

Accounts payable                                                            9,000

Property taxes (80% for plant)                                   10,000

Utilities and power (90% for plant)                           30,000

Work in process inventory, Jan 1, 2017                       12,000

Sales revenue                                                              200,000

Stockholders’ equity                                                     75,000   

Determine:

a)     The cost of goods manufactured.

b)     The operating income.

c)     Give an example of:

i.       Direct cost

i.       Product cost

i.       Period cost

i.       Variable cost

Explanation / Answer

2)

cost of goods sold =beginning FG+cost of goods manufactured-ending FG

= 8000+124000-7000

= 125000

OPerating expense= Administrative costs +building depreciation+ Sales commission expenses +property taxes+utilities and power

35000+[25000*.20]+12000+[10000*.20]+[30000*.10]

35000+ 5000+12000+2000+3000

57000

operating income = sales- cost of goods sold -operating expense

= 200000-125000-57000

= 18000

3)a )Direct cost = direct labor

product cost= Direct material used

period cost= sales commission.

variable cost = direct labor

Direct materials inventory, Jan 1, 2017    15000 Materials purchases 20000 Direct materials inventory, Dec 31, 2017 (16000) 19000 Direct labor 32000 Factory overhead Building depreciation [25000*.80] 20000 Indirect materials and supplies 4000 Supervisory and indirect labor   12000 Property taxes [10000*.80] 8000 Utilities and power [30000*.90] 27000 Totalfactory overhead 71000 manufacturing cost 122000 Work in process inventory, Jan 1, 2017   12000 Work in process inventory, Dec 31, 2017   (10000) cost of goods manufactured 124000

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