Question

Prime Cost, Conversion Cost, Preparation of Income Statement: Manufacturing Firm Kildeer Company makes easels for artists. During the last calendar year, a total of 21,000 easels were made, and 22,000 were sold for $60 each. The actual unit cost is as follows: Direct materials $15.00 5.00 Direct labor Variable overhead 9.00 Fixed overhead 16.00 Total unit cost $45.00 The selling expenses consisted of a commission of $1.20 per unit sold and advertising co-payments totaling $95,000. Administrative expenses, all fixed, equaled $179,000. There were no beginning and ending work-in-process inventories. Beginning finished goods inventory was $112,500 for 2,500 easels Required: 1. Calculate the number and the dollar value of easels in ending finished goods inventory. Ending units Dollar amount

Answer 1

1)
Ending units	1,500
Dollar Amount	$         67,500
Working Notes:
Ending Units
Beginning units	2,500
Add: Units completed	21,000
Less: Units sold	(22,000)
Ending Units	1,500
Cost per unit	$                 45
Dollar amount (1,500 × $ 45)	$          67,500
2)
Kilder Company
Statement of Cost of Goods Sold
For the Year Ended December 31
Cost of goods manufactured (21,000 × $ 45)	$       945,000
Add: Beginning finished goods inventory	112,500
Goods available for sale	$    1,057,500
Less: Ending finished goods inventory	(67,500)
Cost of goods sold	$       990,000
3)
Kildeer Company
Income Statement-Absorption costing
For the Year Ended December 31
			Percent
Sales (22,000 × $ 60)		$ 1,320,000	100.00%
Cost of goods sold		(990,000)	-75.00%
Gross Margin		$    330,000	25.00%
Less: Operating expenses
Commission (22,000 × $ 1.20)	(26,400)
Advertising copayments	(95,000)
Adminstrative expenses	(179,000)	(300,400)	-22.76%
Operating Income		$      29,600	2.24%
Notes: Percentage was calculated by divided from sales amount.