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CHAPTER 2 COST CONCEPTS 4 Review Problem 2: Schedule of Cost of Goods Manufactured and Income Statement The following information was taken from the aocounting records of Klcar-Scal Company for last year. Management wants these data erganised in a bellier Formst so that financial statoments can be peeparod for the year s165.000 Selling expenses Raw malerials inventorcy Jory Raw naterials inventory, December 3 Utilities, faclory Direct laboUE coS Depreciation, factory Parchases of raw materials Sales Insurance, factory Supplies, factory Administrative expenses Indirect labour Maintenance, factory Work-in-process inventory, January Work-in-process inventory, December 31 Pinished goods inventory,Jamuary 1 Pinished goods inventory, December 3 120.000 38.500 157,300 155,000 723,000 2,000 14,000 283,000 305,000 89,000 180,000 100,000 260,000 210,000 Required: 1. Prepare a schedule of cost of goods manufactared, similar to Exhibit 2-8 2. Compute the cost of goods sold 3. Using data as nceded from parts (I) and (2), prepare an income statement
CHAPTER 2:COST CONCEPTS SOLUTION TO REVIEW PROBLEM 2 KLEAR-SEAL COMPANY Schecule of Cost of Goods Mantfactered Direct niateral Ra mateisls inveatory.anary Add:Purchases of raw materials Raw materials avnilable lor use Deduct: Ra naterials inveatory, December 3 Raw materials used io production Direct labour Manufacturing overbead Uilities, factory Depreciation, factory Insurance, factory Supplies, factory Indirect labour Maintenance, factory Total overhead costs Total manufacturing costs Add: Work-in-process inventory, January 1 Deduct: Work-in-process inventory, December 31 Cost of goods manufactured
2. The cost of goods sold would be comipoted as folo Finished goods iaventory, Januxy Add Coot of goods manufactore Good: availsble for sale Coct l goods sold KLEAR SEAL.COMPANY Income Statement For the Year Endcd Decraber 31 Sales Less: Cost of goods sold (sce above) Gross margin Less: Selling and administrative expenses: Selling expenses Administrative expenses Total expenses Net income
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Solution: 1) Schedule of cost of goods manufactured Direct Materials: Raw Material Inventory, January 1 Add: Purchases of Raw Materials Raw Material Available for use Deduct: Raw Material inventory, Dec.31 Raw Material used in production Direct Labor Manufacturing overhead Utilties, Factory Deprecation, Factory Insurance Factory Supplies Factory Indirect Labor Maintenance, factory Total Overhead Cost Total Manufacturing costs Add: Work in process Inventory, January 1 120000 723000 843000 82000 761000 157300 38500 155000 42000 14000 306000 89000 644500 1562800 180000 1742800 100000 1642800 Deduct: Work in process Inventory, December 31 Cost of goods manufactured

2) The cost of goods sold would be completed as follows: Finished goods inventory, January 1 Add: Cost of goods manufactured Goods available for sale Deduct: Finished goods inventory, December 31 Cost of goods sold 260000 1642800 1902800 210000 1692800 3) Income Statement Sales Less: Cost of goods sold Gross Margin Less: Selling and administrative expenses: Selling expenses Admin Expenses Total Expenses Net Income 2500000 1692800 807200 165000 283000 448000 359200

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