Question

The administrative offices and manufacturing plant of Billings Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year:
  

Administrative costs	$	1,651
Building and machine depreciation (75% of this amount is for factory)		1,000
Building utilities (90% of this amount is for factory)		1,330
Direct labor		835
Direct materials inventory, December 31		12
Direct materials inventory, January 1		10
Direct materials purchases		3,690
Factory supervision		491
Finished goods inventory, December 31		69
Finished goods inventory, January 1		55
Indirect factory labor		911
Indirect materials and supplies		693
Marketing costs		876
Property taxes on building (85% of this amount is for factory)		1,000
Sales revenue		12,953
Work-in-process inventory, December 31		25
Work-in-process inventory, January 1		29

Required:

1. Prepare an income statement with a supporting cost of goods sold statement.

Answer 1

Cost of goods sold statement

Direct materials inventory, January 1	10
Direct materials purchases	3,690
Direct materials inventory, December 31	-12
Direct materials consumed	3,688
Direct labor	835
Prime cost	4,523
Factory overheads:
Building and machine depreciation	750
Building utilities	1,197
Factory supervision	491
Indirect factory labor	911
Indirect materials and supplies	693
Property taxes on building	850
Work-in-process inventory, January 1	29
Work-in-process inventory, December 31	-25
Net factory cost	9,419
Finished goods inventory, January 1	55
Finished goods inventory, December 31	-69
Cost of goods sold	9,405

Income statement

Sales revenue	12,953
Cost of goods sold	- 9,405
Gross profit	3,548
Operating expenses:
Administrative costs	- 1,651
Building and machine depreciation	- 250
Building utilities	- 133
Marketing costs	- 876
Property taxes on building	- 150
Operating income	488