Question

StorSmart Company makes plastic organizing bins. The company has the following inventory balances at the beginning and end of March:

	Beginning Inventory			Ending Inventory
Raw materials	$	29,100		$	26,400
Work in process		21,200			45,500
Finished goods		78,900			69,000

Additional information for the month of March follows:

Raw materials purchases	$	41,800
Indirect materials used		1,700
Direct labor		63,200
Manufacturing overhead applied		35,600
Selling, general, and administrative expenses		23,600
Sales revenue		236,400

Required:
1. Based on the above information, prepare a cost of goods manufactured report.

2. Based on the above information, prepare an income statement for the month of March.

Wheeler’s Bike Company manufactures custom racing bicycles. The company uses a job order cost system to determine the cost of each bike. Estimated costs and expenses for the coming year follow:

Bike parts	$	340,800
Factory machinery depreciation		58,500
Factory supervisor salaries		139,000
Factory direct labor		212,963
Factory supplies		39,900
Factory property tax		34,750
Advertising cost		24,500
Administrative salaries		51,500
Administrative-related depreciation		22,200
Total expected costs	$	924,113

Required:

1. Calculate the predetermined overhead rate per direct labor hour if the average direct labor rate is $12.31 per hour.

2. Determine the amount of applied overhead if 17,600 actual hours are worked in the upcoming year.

Answer 1

1) Schedule of cost of goods manufactured

Direct material used
Beginning raw material	29100
Raw material purchase	41800
Raw material available for use	70900
Less: Ending raw material	-26400
Raw material used	44500
Less: Indirect material	-1700
Direct material used		42800
Direct labor		63200
Manufacturing overhead applied		35600
Total manufacturing cost		141600
Beginning work in process		21200
Total cost of work in process		162800
Less: Ending work in process		-45500
Cost of goods manufactured		117300

b) Income statement

Sales revenue		236400
Cost of goods sold
Beginning finished goods	78900
Cost of goods manufactured	117300
Cost of goods available for sale	196200
Less: Ending finished goods	-69000
Cost of goods sold		127200
Gross profit		109200
Selling, general, and administrative expenses		-23600
Net income		85600