Question

13.28 4,5,7 Cost of goods manufactured, cost of goods sold, and income statement Grand Slam Inc. incurred the following costs during March: Selling expenses Direct labor... Interest expense Manufacturing overhead, actual Raw materials used . Administrative expenses $31,675 56,628 8,213 40,950 92.196 24.600 Required: During the month, 3,900 units of product were manufactured and 2,200 units of product were sold. On March 1, GrandSlam carried no inventories. On March 31. there were no inventories for raw materials or work in process. a. Calculate the cost of goods manufactured during March and the average cost per unit of product manufactured. b. Calculate the cost of goods sold during March. c. Calculate the difference between cost of goods manufactured and cost of goods sold. How will this amount be reported in the financial statements? (Optional) Prepare a traditional (absorption) income statement for Grand Slam for the month of March. Assume that sales for the month were $207,060 and the com- pany's effective income tax rate was 35%.

Answer 1

Cost Sheet Statement of March Month
Particulars	Amount
(A)Raw Material Used	92,196
(B)Direct Labor	56,628
(C )Manufacturing Overhead	40,950
(D) Cost of goods Manufactured (A+B+C)	189,774
(E)Total Unit Manufactured in March Month	3900
(F)Unit Cost (D)/(E)	48.66
(G)Unit Sold	2200
Cost of Goods Sold (F)*(G)	107,052

Answers:

1. Cost of goods manufactured is Rs. 1,89,774 calculated as per above table and average cost per unit of product manufactured is 48.66 calculated as per above table.
2. Cost of Goods sold is Rs. 1,07,052 calculated as per above table.
3. Difference between cost of goods manufactured and cost of goods sold is for the inventory which is unsold at the month end. In our question opening inventory is Nil and Ending inventory is 1700 unit (3900-2200). This is shown as change in inventory during the period in Profit and Loss Account.