Question

Consider the following data of the Campbell Company for the year 2016:

 a. Prepare an income statement with a separate supporting schedule manufactured

 b Suppose that direct materials costs are tied to the  production of 900,000 units, What is the unit cost for the direct materials assigned to each unit produced?

Answer 1

Solution:

1)

1) Income Statement Revenues 1,260,000 Cost of goods sold Beginning finished goods inventory, January 1, 100,000 Cost of goods manufactured 960,000 Cost of goods available for sale 1,060,000 Minus: Ending finished goods inventory 150,000 910,000 Gross margin 350,000 Operating costs Marketing promotions 60,000 Marketing salaries 100,000 Distribution costs 70,000 Customer-service costs 100,000 330,000 Operating income 20,000 Schedule of Cost of Goods Manufactured Direct materials Beginning inventory, January 1 40,000 Purchases of direct materials 460,000 Cost of direct materials available for use 500,000 Ending inventory, December 31 50,000 Direct materials used 450,000 (V) Direct manufacturing labor 300,000 (V) Indirect manufacturing costs Sandpaper 2,000 (V) Materials-handling costs 70,000 (V) Lubricants and coolants 5,000 (V) Miscellaneous indirect manufacturing labor 40,000 (V) Plant-leasing costs 54,000 (F) Depreciation - plant equipment 36,000 (F) Fire insurance on plant equipment 4,000 (F) Manufacturing costs incurred 3,000 (F) 964,000 Beginning work-in-process inventory, January 1 10,000 Total manufacturing costs to account for 974,000 Ending work-in-process inventory, December 31, 14,000 Cost of goods manufactured (to income statement) 960,000 2) Direct material unit cost = Direct materials used / Produced units = $450,000 / 900,000 units = $0.50 per unit Plant leasing unit cost = Plant leasing costs / Produced units = $54,000 / 900,000 units = $0.06 per unit

Schedule of Cost of Goods Manufactured
Direct materials
Beginning inventory, January 1		40,000
Purchases of direct materials		460,000
Cost of direct materials available for use		500,000
Ending inventory, December 31		50,000
Direct materials used		450,000 (V)
Direct manufacturing labor		300,000 (V)
Indirect manufacturing costs
Sandpaper	2,000 (V)
Materials-handling costs	70,000 (V)
Lubricants and coolants	5,000 (V)
Miscellaneous indirect manufacturing labor	40,000 (V)
Plant-leasing costs	54,000 (F)
Depreciation - plant equipment	36,000 (F)
Fire insurance on plant equipment	4,000 (F)
Manufacturing costs incurred	3,000 (F)	964,000
Beginning work-in-process inventory, January 1		10,000
Total manufacturing costs to account for		974,000
Ending work-in-process inventory, December 31,		14,000
Cost of goods manufactured (to income statement)		960,000

2) Direct material unit cost = Direct materials used / Produced units

= $450,000 / 900,000 units

= $0.50 per unit

Plant leasing unit cost = Plant leasing costs / Produced units

= $54,000 / 900,000 units

= $0.06 per unit