Question

$ #1 JackJoe Corporation provided the following list of cost data related to its manufacturing operations for the month of September 20X4. All raw materials are direct materials. Beginning raw materials inventory 500,000 Raw materials purchased (net) 2,000,000 Ending raw materials inventory 750,000 Direct labor costs 400,000 Factory rent (fixed) 125,000 Indirect labor (fixed) 95,000 Factory utilities and maintenance (fixed) 450,000 Factory depreciation (fixed) 56,000 Beginning work in process 777,000 Ending work in process 717,000 SG&A sales commissions variable 400,000 SG&A fixed 2,500,000 Beginning Finished goods inventory 3,000,000 must be Ending Finished goods inventory calculated Arrange the cost data into a statement of cost of goods manufactured. If JackJoe sold 10,000 units for $10,000,000 at a cost of goods sold for the month was $4,000,000, what was the ending balance in finished goods inventory for the month of September? Write the journal entries to (1) purchase the raw materials, (2) transfer raw materials to W-I-P, (3) transfer goods manufactured to finished goods and (4) reduce inventory for goods sold. Prepare a multi-step income statement Compute breakeven in units and sales dollars assuming Variable costs are $300 per unit Compute the contribution margin on a per unit basis

Answer 1

a.

Statement of Cost of Goods Manufactured
Beginning work in process		$ 777,000
Cost of raw materials used in production
Beginning raw materials	$ 500,000
Purchase of raw materials	2,000,000
Cost of raw materials available for use	2,500,000
Ending raw materials	(750,000)	1,750,000
Direct labor		400,000
Factory Overhead
Factory rent	125,000
Indirect labor	95,000
Factory utilities	450,000
Factory depreciation	56,000	726,000
Total Manufacturing Costs		2,876,000
Total Cost of Work in Process		3,653,000
Less: Ending work in process		(717,000)
Cost of Goods Manufactured		$ 2,936,000

b. Ending balance in finished goods inventory = $ 3,000,000 + $ 2,936,000 - $ 4,000,000 = $ 1,936,000

c.

Transaction	Account Titles	Debit	Credit
		$	$
1.	Raw Materials Inventory	2,000,000
	Accounts Payable		2,000,000
2.	Work in Process Inventory	1,750,000
	Raw Materials Inventory		1,750,000
3.	Finished Goods Inventory	2,936,000
	Work in Process Inventory		2,936,000
4.	Cost of Goods Sold	4,000,000
	Finished Goods Inventory		4,000,000

d.

Income Statement For the month ending September 30
Sales		$ 10,000,000
Cost of Goods Sold		4,000,000
Gross Profit		6,000,000
Selling General and Administrative Expenses
Sales Commission Expense	$ 400,000
Fixed SG & A	2,500,000	2,900,000
Net Operating Income		3,100,000

e. Contribution margin per unit = $ 1,000 - $ 300 = $ 700.

Total Fixed Costs = $ 726,000 + $ 2,500,000 = $ 3,226,000

Break-even units = $ 3,226,000 / $ 700 = 4,608.57 units or 4,609 units.