Hawthorn Corporation manufactures custom all-terrain vehicles (ATVs) and uses a
ID: 2425926 • Letter: H
Question
Hawthorn Corporation manufactures custom all-terrain vehicles (ATVs) and uses a job costing system to as- sign and track costs. March's beginning inventory consisted of the following components:
Raw materials Work in process Finished goods
$65,000 27,000 80,000
The above beginning work in process consisted only of Job #02.778. The finished goods inventory consisted of Job #01.987 ($42,500) and Job #02.665 ($37,500).
The following transactions occurred during March:
Purchased $112,000 of raw materials.
Used $117,000 of raw materials in the production process. Of this amount, $95,000 con- sisted of parts and other materials "directly" incorporated into ATVs. The remainder was "indirect" material for shop supplies and small dollar items that are not otherwise traceable to specific ATVs.
Total wages and salaries were $225,000. This total was 60% attributable to direct labor, 10% to indirect labor, 5% to sales commissions, and 25% to general and administrative activities.
Depreciation for the period totaled $28,000. Of this amount, 75% related to factory and factory related equipment, and is contemplated in the factory overhead rates. The other 25% is related to general and administrative activities.
Other general and administrative costs, excluding wages and depreciation, totaled $15,000.
Other factory overhead costs, excluding indirect materials, wages, and depreciation, totaled $35,500. Hawthorn applies factory overhead at 75% of direct labor costs.
The ending work in process consisted of two jobs: Job #03.004 ($25,500) and Job #03.772 ($21,500). All completed units had been delivered to customers, and there was no ending finished goods inventory. Sales for the month amounted to $625,000. All sales are for cash at time of shipment.
Prepare (a) a Statement of Cost of Goods Manufactured (b) Cost of Goods Sold (c) Income Statement
Explanation / Answer
Statement of Cost of Goods manufactured
Opening Stock of Raw materials - 65,000.00
Add : Raw material Purcahsed- 1,12,000.00
1,77,000.00
Less Raw Material not used Used- 60,000.00
Cost of Raw materials 1,17,000.00
Beginning of Raw materials is in work
process 27,000.00
Expenditures
(direct charges 60% of 2,250000 1,35,000.00
Indirect wages and Salries Paid 22,500.00
( 10% of 2,25,000)
Other Administrative charges 56,250.00
(25% of 2,25000)
Depreciations - 28,000.00
Other general Charges 15,000.00
Other Factory overheads 35,000.00
Factory Over heads 2,91,750.00
Total Cost : 4,35,750.00
Less- Ending work in Process inventory 47,500.00
Actual Cost of Goods Manufactured = 4,83,250.00
Statement showing the cost of Goods Sold
Opening stock of finished goods - 80,000.00
Add- Cost of Goods Manufactured - 4,83,250.00
Cost of Goods available for sale 5,63,250.00
Income statement
Sales 6,25,000.00
Less; cost of Goods sold - 5,63,250.00
Net Income 61,250.00
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