Question

      The Fine manufacturing company uses a job-order costing system. The company uses machine hours to apply overhead cost to jobs. At the beginning of 2019, the company estimated that 150,000 machine hours would be worked, and 900,000 overhead costs would be incurred during 2019.

The balances of raw materials, work in process (WIP), and finished goods at the beginning of 2019 were as follows:

·         Raw Materials:40,000

·         Work in Process: 30,000

·         Finished Goods:60,000

The Fine manufacturing company recorded the following transactions during 2019:

a.       Raw materials purchased on account, 820,000.

b.      Raw materials were requisitioned for use in production, 760,000 (720,000 direct materials and 40,000 indirect materials).

c.       Direct labor cost, 150,000; indirect labor, 220,000; sales commission, 180,000; and administrative salaries, 400,000.

d.      Sales travel costs were 34,000.

e.       Utility costs incurred in the factory, 86,000.

f.       Advertising expenses were 360,000.

g.      Depreciation for the year was 700,000 (560,000 relates to factory and 140,000 relates to selling and administrative activities).

h.      Insurance expired during the year, 20,000 (14,000 relates to factory operations, and 6,000 refers to selling and administrative activities).

i.        Fine manufacturing company worked 160,000 machine hours. Manufacturing overhead was applied to production.

j.        Goods costing 1,800,000 were completed during the year.

k.      The products costing 1,740,000 were sold to customers for 3,000,000.

Required:

1.      Create Cost of Goods Sold Statement using normal costing.

2. Create an Income Statement for Fine Manufacturing Company