Question

QUESTION 2 (16 MARKS) Nana Corporation, a manufacturing company, produces a single product. The following information has been taken from the company's production, sales, and cost records for the just completed year. Production in units Sales in units 11,600 Ending finished goods inventory in units Sales 1,200 RM520,000 anut Costs: Direct labor Raw materials purchased Manufacturing overhead Selling and administrative expenses RM36,000 RM192,000 0000 RM120,000 RM152,000 Beginning of the year End of the year Inventories: RM12,000 RM16,000 000.00 Raw materials Work in process Finished goods RM8,000 RM20,000 Nil The finished goods inventory is being carried at the average unit production cost for the year. The selling price of the product is RM50 per unit. Required: a) Prepare a schedule of cost of goods manufactured for the year. (8 marks) b) Prepare the income statement for the year. (8 marks)

Answer 1

Solution: a).

$20,000 Nana corp. Schedule of Cost of Goods Manufactured for the year Beginning Work-in-Process Inventory Direct Materials Used: Beginning Raw material Inventory $ 8,000 Purchases of Raw Materials 192,000 Raw Materials Available for use 200,000 Ending raw material inventory (12,000) Direct Materials used $ 188,000 Direct labor 36,000 Manufacturing Overhead 120,000 Total Manufacturing Costs incurred Ending Work-in-process inventory Cost of Goods manufactured 344,000 (16,000) $ 348,000

b.

$ 520,000 Nana Corp. Income Statement For the year Revenue: Sales revenue $50x(11,600 - 1,200) Cost of goods sold: Beginning finished goods inventory $0 Cost of goods manufactured 348,000 Cost of goods availbale for sale 348,000 Ending finished goods inventory ($30x1200) (36,000) Cost of goods sold Gross profit Selling and Administration Expense Operating Income (312,000) 208,000 (152,000) $ 56,000

workings: per unit cost of finished goods = $348,000 / 11,600 = $30

Sales in units = 11,600 - 1,200 = 10,400

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