Question

Cost Assignment Methods

Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water are mixed together and then bottled in 10-gallon drums. Brody provided the following information for last year:

Raw materials purchases	$250,000
Direct labor	140,000
Depreciation on factory equipment	45,000
Depreciation on factory building	30,000
Depreciation on headquarters building	45,000
Factory insurance	15,000
Property taxes:
Factory	20,000
Headquarters	18,000
Utilities for factory	34,000
Utilities for sales office	1,800
Administrative salaries	150,000
Indirect labor salaries	153,000
Sales office salaries	90,000
Beginning balance, raw materials	127,000
Beginning balance, work in process	124,000
Beginning balance, finished goods	84,000
Ending balance, raw materials	102,000
Ending balance, work in process	130,000
Ending balance, finished goods	85,000

Last year, Brody completed 100,000 units. Sales revenue equaled $1,200,000, and Brody paid a sales commission of 5 percent of sales.

Required:

1. Calculate the direct materials used in production for last year.

$

2. Calculate total prime cost.

$

3. Calculate total conversion cost.

$

Feedback

1. See Cornerstone 2.2

2. See Cornerstone 2.1

3. See Cornerstone 2.1

4. Prepare a cost of goods manufactured statement for last year.

Brody Company
Statement of Cost of Goods Manufactured
For Last Year
Direct materials	$
Direct labor
Overhead
Total manufacturing cost	$
Add: Beginning work in process
Less: Ending work in process
Cost of goods manufactured	$

Feedback

Calculate the unit product cost. If required, round your answer to the nearest cent.

$

Feedback

5. Prepare a cost of goods sold statement for last year.

Brody Company
Statement of Cost of Goods Sold
For Last Year
Cost of goods manufactured	$
Add: Beginning inventory, Finished goods
Less: Ending inventory, Finished goods
Cost of goods sold	$

Feedback

6. Prepare an income statement for last year. Show the percentage of sales that each line item represents. When required, round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

Brody Company
Income Statement
For Last Year
		Percent
Sales	$	%
Cost of goods sold		%
Gross margin	$	%
Less: Operating expenses
Selling expenses		%
Administrative expenses		%
Operating income	$	%

Answer 1

1.

Direct material used in production = Beginning raw material+Raw material purchases-Ending raw material

Direct material used in production = $127,000+250,000-102,000 = $275,000

2.

Total prime cost = Direct material used + Direct labor

Total prime cost = $275,000 + 140,000 = $415,000

3.

Total conversion cost = Direct labor + Factory overhead

Total conversion cost = $140,000 + 297,000 = $437,000

Factory overhead:

Depreciation on factory equipment	$45,000
Depreciation on factory building	30,000
Factory insurance	15,000
Factory property taxes	20,000
Utilities for factory	34,000
Indirect labor	153,000
Total	$297,000

4.

Brody Company Statement of Cost of Goods Manufactured For Last Year
Direct material	$275,000
Direct labor	140,000
Overhead	297,000
Total manufacturing cost	712,000
Beginning work in process	124,000
Ending work in process	(130,000)
Cost of goods manufactured	$706,000

Unit product cost = $706,000 / 100,000 = $7.06

5.

Brody Company Statement of Goods Sold For Last Year
Cost of goods manufactured	$706,000
Add: Beginning inventory, finished goods	84,000
Less: Ending inventory, finished goods	(85,000)
Cost of goods sold	$705,000

6.

Brody Company Income Statement For Last Year
		Percent
Sales	$1,200,000	100%
Cost of goods sold	705,000	58.75%
Gross margin	495,000	41.25%
Operating expenses:
Selling expenses	151,800	12.65%
Administrative expenses	213,000	17.75%
Operating income	$130,200	10.85%

Administrative expenses :

Depreciation on headquarter building	$45,000
Property taxes headquarter	18,000
Administrative salaries	150,000
Total	$213,000

Selling expenses:

Utilities for sales office	$1,800
Sales office salaries	90,000
Sales commission ($1,200,000*5%)	60,000
Total	$151,800