NAME: Normal Costing Review Problem Yuletide Company is a manufacturing firm tha

Question

NAME: Normal Costing Review Problem Yuletide Company is a manufacturing firm that uses normal costing. The company's inventory balances were as follows at the beginning and end of the calendar year 2016. Beginning Balance Direct Materials $14,000 Work in Process $27,000 Finished Goods$62,000 Ending Balance $22,000 $9,000 $77,000 The company applies overhead to jobs using a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated it would work 33,000 machine hours and incur $231,000 in overhead cost. The following information may be useful to you as you complete your tasks. A. Direct Materials purchased during 2016 cost a total of $315,000 B. The following employee costs were incurred: i. Direct Labor $377,000 I i Administrative Salaries 172,000 ii. Sales Salaries $147,000 C. Factory Utility Costs: $10,000 D. Depreciation for the year was $127,000 of which $120,000 is related to factory operations and $7,000 is related to selling and administrative activities. E. Machine Hours: Actual machine hours incurred in 2016 were 35,000 G. Ending Accounts Receivable Balance: $84, 000 H. Ending Prepaid Expenses: $25,000 I. Administrative Expense: $74,000 . Finished Goods Warehousing Expense was $38,000 L. M. Overhead: Assume that any under or over-applied overhead is closed 100% to Cost of Good Sold. Sales for year totaled $1,363,000 Factory Maintenance Costs: $122,000 Tasks for our homework: A. Prepare a Schedule of Cost of Goods Manufactured in Good Form (Remember that means a proper B. Prepare an Income Statement in Good Form as well. heading too!)

Explanation / Answer

Yuletide Copany Statement of Cost of goods manufactured Amount Amount Direct materials used Opening Inventories $            14,000 Purchases $        3,15,000 Available materials $        3,29,000 Less: Closing Inventories $          -22,000 $         3,07,000 Direct labour $         3,77,000 Over heads factory Unitility costs $            10,000 depreciation $        1,20,000 manufacturing overhead Absorbed 35000*7 $        2,45,000 factory maintenance costs $        1,22,000 $         4,97,000 Add: Opening Work in Progress $            27,000 Less; Closing Work in Progress $             -9,000 Cost of Finished goods manufactured $      11,99,000 Predetermined Over head rate =231000/33000=$7 per hour Yuletide Copany Income Statement for the year 2016 Particulars Amount Amount Sales $      13,63,000 less: cost of goods sold Cost of goods manufactured $      11,99,000 Add: Opening Finished Goods $            62,000 less: Closing Finished goods $          -77,000 $      11,84,000 Less: over applied Manufactured Over head $          -14,000 (35000-33000)*$7 Cost of goods sold $      11,70,000 $      11,70,000 gross profit $         1,93,000 Less:Selling & Admin Expenses Admin Salaries $        1,72,000 Sales Salaries $        1,47,000 Depreciation on Selling Activities $              7,000 Admin Expenses $            74,000 Ware housing Expenses $            38,000 $         4,38,000 Net income / (Loss) $       -2,45,000

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