Question

Santana Rey, owner of Business Solutions, decides to diversify her business by also manufacturing computer workstation furniture. Required: 1. Classify the following manufacturing costs of Business Solutions as (a) variable or fixed and (b) direct or indirect. 2. Prepare a schedule of cost of goods manufactured for Business Solutions for the month ended January 31, 2020. Assume the following manufacturing costs: Direct materials: $2,600 Factory overhead: $510 Direct labor: $1,200 Beginning work in process: none (December 31, 2019) Ending work in process: $550 (January 31, 2020) Beginning finished goods inventory: none (December 31, 2019) Ending finished goods inventory: $400 (January 31, 2020) 3. Prepare the cost of goods sold section of a partial income statement for Business Solutions for the month ended January 31, 2020.

Answer 1

Solution

	Classification
Direct Material	Direct	Variable cost
Direct labor	Direct	Variable cost
Factory overhead	Indirect	Fixed as well as variable

.

BUSINESS SOLUTIONS
Schedule of Cost of goods manufactured
Direct material	$           2,600.00
Direct labor	$           1,200.00
Manufacturing overhead	$               510.00
Total manufacturing costs	$           4,310.00
Add: Beginning Work in process	$ 0.00
Total costs of goods in process	$           4,310.00
Less: Ending Work in process	$               550.00
Cost of goods manufactured	$           3,760.00

.

BUSINESS SOLUTIONS
Schedule of Cost of goods Sold
Finished goods inventory, Beginning	$ 0.00
Add:Costs of good manufactured	$           3,760.00
Goods available for sale	$           3,760.00
Finished goods inventory, Ending	$               400.00
Cost of Goods Sold	$           3,360.00