The Foster Manufacturing Company has the following inventories on hand at 1 June

Question

The Foster Manufacturing Company has the following inventories on hand at 1 June .

Raw Materials

$ 12,000

Work in Process

14,000

Finished Goods

10,000

The following information relates to June operations:

(a)    Materials purchased (plus 10% GST)

$ 25,000

(b)    Materials returned to suppliers

$   5,000

(c)    Materials issued for production:
Direct

Indirect

$ 20,000

$   4,000

(d)    Total Payroll incurred:

Direct Labour ($10 per hour)

Indirect Labour

$ 35,000

$ 11,000

(e)     The payroll due to employees was paid after deducting 35% for income tax withheld.

(f )    Overhead incurred (in addition to indirect materials and indirect labour) amounted to $7,500 comprising:

Depreciation of Plant

Expired Insurance

$   7,000

$      500

(g)    Factory Overhead is applied at the rate of $6.00 per direct labour hour.

(h)    Finished goods completed during June amounted to $80,000.

(i)     Goods costing $84,000 were sold during the period at a markup on cost of 80%.

( j)    Selling and administration expenses incurred during the month were $18,000 and $19,200 respectively (plus 10% GST)

Required:

Prepare a Manufacturing Statement, Cost of Goods Sold Summary and Income Statement for June.

Raw Materials

$ 12,000

Work in Process

14,000

Finished Goods

10,000

Explanation / Answer

**Direct Labor Hours : 35000/10 = 3500DLH

3)Overhead Actually incurred :4000+11000+7000+500=22500

Overhead underapplied : 22500-21000 = 1500

**GST credit is available thus it will not be included in cost.

Manufacturing Statement Direct Material 20000 Direct labor 35000 Overhead Applied [3500*6] 21000 Total manufacturing cost 76000 Add:Beginning WIP 14000 90000 less :Ending WIP [90000-10000] (10000) COst of goods manufactured 80000

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