The following events took place for Chi-Lite Inc. during June, the first month o

Question

The following events took place for Chi-Lite Inc. during June, the first month of operations as a producer of road bikes Purchased $396,730 of materials. Used $343,310 of direct materials in production. Incurred $294,600 of direct labor wages. ·Applied factory overhead at a rate of 74% of direct labor cost. Transferred $816,250 of work in process to finished goods. Sold goods with a cost of $797,470. Sold goods for $1,409,300. Incurred $318,060 of selling expenses. Incurred $120,840 of administrative expenses. Required a. Prepare the June income statement for Chi-Lite. Assume that Chi-Lite uses the perpetual inventory method. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. Colons () will fill in where needed. b. Determine the inventory balances at the end of the first month of operations.

Explanation / Answer

=> Closing stock of raw materials = $53,420

=> Closing work in progress = $ 39,664

Profit = $ 293,770

Working Note Cost Sheet of Chi - Life Inc for the month of June Particulars Amount Amount Opening Stock of Raw Materials $0 Add: Purchases $396,730 Less: Closing Stock of Raw materials (B/f) $53,420 Cost of Materials consumed $343,310 Direct labour $294,600 Direct Expenses $0 Prime Cost $637,910 Add: Factory Overheads $218,004 (@ 74% of Direct labour cost) (294600 x 74%) Add: Opening work-in-progress $0 Less: Closing work-in-progress $39,664 $178,340 Works cost $816,250 Add: Administrative expenses / Overheads $120,840 Cost of Production $937,090 Add: Opening stock of Finished Goods $0 Less: Closing stock of Finished Goods $139,620 -$139,620 Cost of Goods sold $797,470 Add: Selling expenses $318,060 Cost of Sales $1,115,530 Add: Profit / (Loss) (B/f) $293,770 Sales $1,409,300

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