Question

Exercise 2-29 Schedules of Cost of Goods Manufactured and Sold; Income Statement (LO 2-1, 2-3, 2-6)

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Alexandria Aluminum Company, a manufacturer of recyclable soda cans, had the following inventory balances at the beginning and end of 20x1.

Inventory Classification	January 1, 20x1				December 31, 20x1
Raw material	$	55,000			$	70,000
Work in process		120,000				115,000
Finished goods		150,000				165,000

During 20x1, the company purchased $250,000 of raw material and spent $400,000 on direct labor. Manufacturing overhead costs were as follows:

Indirect material	$	12,000
Indirect labor		26,000
Depreciation on plant and equipment		100,000
Utilities		24,000
Other		30,000

Sales revenue was $1,105,000 for the year. Selling and administrative expenses for the year amounted to $110,000. The firm’s tax rate is 40 percent.

Exercise 2-29 Part 1

Required:

1. Prepare a schedule of cost of goods manufactured

Answer 1

Statement of Cost of goods manufactured :- Particulars Amount $ Work in process Inventory, January 1 1,20,000 Direct material used :- Material Inventory as on January 1 55,000 Purchases 2,50,000 Cost of material available for use 3,05,000 Less: Material Inventory on December 31 70,000 Cost of direct material used 2,35,000 Direct labor 4,00,000 Factory overhead:- Indirect material 12,000 Indirect labor 26,000 Depreciation on plant and equipment 1,00,000 Utilities 24,000 Other 30,000 Total Factory overhead 1,92,000 Total manufacturing cost incurred 8,27,000 Less: Work in process Inventory, December 31 1,15,000 Cost of goods manufactured 7,12,000