Question

La Sim Manufacturing Company provided the following information for the year 2019 Inventories Direct Materials Work-in-Process Finished Goods 31/12/2018 31/12/2019 $84,000 $60,000 26,000 54,000 94,000 89.000 Other information: Sales Revenue Raw materials purchased Direct labor Indirect materials Plant supervisor's salary Office cleaner's wages Depreciation on factory plant & equipment Plant utilities Special Design Cost Insurance Office Utilities Depreciation on delivery truck Administrative salaries Salesmen commission Advertising 1.998,000 360,000 470,000 60,000 49,000 8,000 89,000 130,000 25,700 120,000 42,100 18,000 78,000 26,000 10,200 Of the total insurance, 75% relates to manufacturing & 25% relates to general & administrative costs. Requirements: (A) What was the amount of direct materials used in production? (B) What was the amount of factory overhead costs? (C) What is the prime cost and conversion cost of the product? (D) Prepare a schedule of cost of goods manufactured for the year ended December 31, 2019, clearly showing total manufacturing costs & total manufacturing costs to account for. (E) Prepare an income statement for La Sim Manufacturing for the year ended December 31, 2019, clearly showing cost of goods sold. (F) During the year, La Sim Manufacturing Company produced 2.550 units of product. What was the unit product cost?

Answer 1

Statement of Cost of goods manufactured:
Beginning Raw Materials	84,000.00
Add: Raw materials purchased	360,000.00
Total materials available for Sale	444,000.00
Less: Ending Raw materials	60,000.00
Direct Materials used		384,000.00
Add: Direct labor		470,000.00
Prime cost		854,000.00
Add: factory overhead
Indirect Materials	60,000.00
Plant supervisor Salary	49,000.00
Depreciation on factory plant & equipment	89,000.00
Plant utilities	130,000.00
Special design cost	25,700.00
Insurance (120,000*75%)	90,000.00
Total factory overhead		443,700.00
Total Manufacturing cost		1,297,700.00
Add: beginning balance, WIP		26,000.00
Total cost work in process inventory		1,323,700.00
less: Ending balance, WIP		54,000.00
Cost of goods manufactured		1,269,700.00
Cost of Goods sold
Beginnig finished Goods inventory		94,000.00
Add: Cost of goods manufactured		1,269,700.00
Cost of goods available for Sale		1,363,700.00
Less: Ending finished goods inventory		89,000.00
Cost of goods sold		1,274,700.00
Income Statement
Sales revenue		1,998,000.00
less: Cost of goods sold		1,274,700.00
Gross profit		723,300.00
less: sales & administrative expense:
General & administrative expense:
Office cleaner wages	8000
Insurance (25% X 1200000)	30,000.00
Administrative salaries	78,000.00
Office Utilities	42,100.00
Depreciation on Delivery Truck	18000
Salesmen commission	26000
advertising	10200	212,300.00
Net income		511,000.00
Conversation cost
Direct labour		470,000.00
Add: factory overhead
Indirect Materials	60,000.00
Plant supervisor Salary	49,000.00
Depreciation on factory plant & equipment	89,000.00
Plant utilities	130,000.00
Special design cost	25,700.00
Insurance (120,000*75%)	90,000.00	443,700.00
Conversation cost		913,700.00
Unit product cost = Direct Materials + Direct Labor + Factory cost / number of units produced
Unit product cost = (384000+470000+443700)/2550=
Unit product cost = 1,297,700/2550=508.90