Question

QUESTION 2- (15 points) The following data are from ABC Inc. accounting records at December 31, 2018: Sales (22,000 units) Raw materials inventory, beginning Raw materials inventory, ending Purchases of raw materials Direct labour Prime costs (total) Conversion costs (total) Commissions Work-in-process inventory, beginning Work-in-process inventory, ending Depreciation-equipment Finished goods inventory, beginning (6,000 units) Finished goods inventory, ending (4,000 units) Rent-factory Property taxes: factory Administration General office salaries $1,320,000 76.000 To be determined 232,000 To be determined 512,000 540.000 10% of sales 88.000 130,000 170,000 180,000 To be determined 30,000 50.000 80,000 242,000 1.Prepare the schedule of COGM for year 2018. Show production in units and cost of goods manufactured per unit. 2.Calculate Gross margin for year 2018. Assume ABC Inc. uses FIFO.

Answer 1

Answer with working notes is given below

ABC Inc. Schedule of Cost of Goods Manufactured Direct Material Opening inventory of Raw Material $76,000 Add: purchases $232,000 Total Raw Material Available $308,000 Less: Closing inventory of Raw Material $86,000 Raw material used in production Direct Labor Prime Cost Factory overheads Depreciation expense-factory equipment $170,000 Property taxes $50,000 Factory rent $30,000 Total manufacturing cost Add: Opening work in process inventory $222,000 $290,000 $512,000 $250,000 $762,000 $88,000 $850,000 $130,000 $720,000 Less: Closing work in process inventory Cost of Goods Manufactured Production units Sales units Add: Closing units 22,000 4,000 26,000 6,000 20,000 Less: Opening units Production units Cost of goods manufactured per unit Cost of goods manufactured Production units Cost of goods manufactured per unit $720,000 20,000 $36.00 Direct Labor cost Total conversion cost Less: manufacturing expenses Direct Labor cost $540,000 $250,000 $290,000 Direct material consumed Prime cost Direct labour cost Direct material consumed $512,000 $290,000 $222,000 Closing stock of raw material Opening stock of raw material Purchase of raw material $76,000 $232,000 $308,000 $222,000 $86,000 Direct material consumed Closing stock of raw material ABC Inc. Income Statement For the year ended 2018 Sales Less: Cost of Goods Sold Gross profit Amount $1,320,000 $756,000 As per working note below $564,000 Working notes: ABC Inc. Schedule of Cost of Goods Sold Opening Finished Goods inventory Add: Cost of Goods manufactured Cost of Goods available for sale Less: Closing Finished Goods inventory Cost of Goods sold $180,000 $720,000 As per working above $900,000 $144,000 (4,000*$36) $756,000