Question

Manufacturing Income Statement, Statement of Cost of Goods Manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December:

	On Company		Off Company
Materials inventory, December 1	$71,830		$94,820
Materials inventory, December 31	(a)		107,150
Materials purchased	182,450		213,350
Cost of direct materials used in production	192,500		(a)
Direct labor	270,800		(b)
Factory overhead	84,040		106,200
Total manufacturing costs incurred in December	(b)		613,490
Total manufacturing costs	685,260		685,250
Work in process inventory, December 1	137,910		228,520
Work in process inventory, December 31	116,360		(c)
Cost of goods manufactured	(c)		607,800
Finished goods inventory, December 1	121,390		106,200
Finished goods inventory, December 31	127,140		(d)
Sales	1,058,770		948,200
Cost of goods sold	(d)		613,490
Gross profit	(e)		(e)
Operating expenses	137,910		(f)
Net income	(f)		210,500

Required:

1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

Letter	On Company	Off Company
a.	$	$
b.	$	$
c.	$	$
d.	$	$
e.	$	$
f.	$	$

Feedback

1.

a. The cost of direct materials used in production includes the beginning materials inventory plus purchases, less the ending materials inventory.

b. Total manufacturing costs incurred during December include direct materials, direct labor, and factory overhead.

c. The cost of goods manufactured is beginning work in process plus total manufacturing costs less the ending work in process.

d. The cost of goods sold is the beginning finished goods plus the cost of goods manufactured, less the ending finished goods.

e. Sales minus cost of goods sold equals gross profit.

f. Gross profit minus operating expenses equals net income.

Use similar relationships from Grant to find the missing amounts for the McClellan items (a) through (f).

2. Prepare On Company's statement of cost of goods manufactured for December.

On Company
Statement of Cost of Goods Manufactured
For the Month Ended December 31
Work in process inventory, December 1			$
Direct materials:
Materials inventory, December 1	$
Purchases
Cost of materials available for use	$
Materials inventory, December 31
Cost of direct materials used in production		$
Direct labor
Factory overhead
Total manufacturing costs incurred during December
Total manufacturing costs			$
Work in process inventory, December 31
Cost of goods manufactured			$

Feedback

2. The cost of goods manufactured is the beginning work in process plus the cost of direct materials used in production plus direct labor and factory overhead, less the ending work in process.

3. Prepare On Company's income statement for December.

On Company
Income Statement
For the Month Ended December 31
Sales		$
Cost of goods sold:
Finished goods inventory, December 1	$
Cost of goods manufactured
Cost of finished goods available for sale	$
Finished goods inventory, December 31
Cost of goods sold
Gross profit		$
Operating expenses
Net income		$

Answer 1

Ans.1

Letter	On Company	Off Company
a	61780	201020
b	547340	306270
c	706810	305970
d	701060	100510
e	357710	334710
f	219800	124210

Ans.2

On Company
Statement of Cost of Goods Manufactured
For the Month Ended December 31
Work in process inventory, December 1			137910
Direct materials:
Materials inventory, December 1	71830
Purchases	182450
Cost of materials available for use	254280
Materials inventory, December 31	61780
Cost of direct materials used in production		192500
Direct labor		270800
Factory overhead		84040
Total manufacturing costs incurred during December		547340
Total manufacturing costs			685260
Work in process inventory, December 31			116360
Cost of goods manufactured			568890

Ans.3

On Company
Income Statement
For the Month Ended December 31
Sales		1058770
Cost of goods sold:		701060
Finished goods inventory, December 1	121390
Cost of goods manufactured	706810
Cost of finished goods available for sale	$
Finished goods inventory, December 31	127140
Cost of goods sold	701060
Gross profit		357710
Operating expenses		137910
Net income		219800