Question

Jacob Corporation is a manufacturer that produces cosmetics. The following information has been taken from the company’s production, sales, and cost records for the just-completed year:

Production in units	100,000
Sales in units	?
Ending finished goods Inventory in units	?
Sales in Rupees	Rs 2,000,000
Costs :
Other selling and administrative expenses	Rs 40,000
Other factory overhead costs	Rs 22,000
Selling and administrative salaries	Rs 240,000
Maintenance Factory	Rs 50,000
Utilities-factory	Rs 60,000
Building Rent (Production Uses 80% of the   Space; administrative and sales offices use the rest)	Rs 100,000
Royalty paid for use of Production patent, Rs 0.5 per unit produced)	?
Rent for special production equipment, Rs   5000 per year plus Rs 0.2 per unit produced)	?
Insurance factory equipment	Rs 20,000
Cleaning supplies, factory	Rs 10,000
Depreciation Factory	Rs 18,000
Advertising cost	Rs 600,000
Direct labor	Rs 80,000
Indirect labor	Rs 20,000
Property   taxes, factory	Rs 10,000
Raw material purchased	Rs 200,000

The finished goods inventory is being carried at the average unit production cost for the year. The selling price of the product is Rs 32 per unit.

Required:

A.      Prepare a Cost of Goods Manufactured Statement for the year.                                   

B.      Compute the number of units and cost of units in the finished goods inventory at the end of the year.

C.      Prepare an Income Statement for the year under the Absorption costing Method.       

D.      Compute the following cost:

    i.             Prime cost

    ii.             Conversion cost

    iii.             Inventoriable cost

    iv.             Non-Manufacturing cost

E.      Prepare T-accounts of the following:

    i.            Work in process

    ii.             Finished goods

Answer 1

А $200,000 $80,000 Jacob Manufacturing Schedule of Cost of Goods Manufactured Raw material purchase and used in production Direct labor Manufacturing overheads Indirect labor $20,000 Maintenance Factory $50,000 Utilities factory $60,000 Building rent (80% of $100,000) $80,000 Royalty (100,000*$0.50) $50,000 Rent for special equipment ($5,000+ 100,000*$0.20) $25,000 Factory equipment insurance $20,000 Cleaning supplies, Factory $10,000 Depreciation Factory $18,000 Property taxes, Factory $10,000 Other factory overheads $22,000 Total Manufacturing overheads Cost of goods manufactured $365,000 $645,000 B Closing units Production units Sales units Closing units Manufacturing cost per unit Cost of Ending Finished goods inventory 100,000 62,500 ($2,000,000/$32) 37,500 a $6.45|b $241,875 a*b Per unit Manufacturing cost per unit Cost of goods manufactured Total output $645,000 $6.45 100,000 с $2,000,000 Jacob Manufacturing Income Statement Sales Less: Cost of goods sold Cost of Goods manufactured Less: Ending Finished Goods inventory Cost of Goods sold Gross profit Less: Operating expenses Selling and administrative expenses Advertising expenses Selling and administrative salaries Building rent (20% of $100,000) Other selling and administrative expenses Total operating expenses Net Income from Operations $645,000 $241,875 $403,125 $1,596,875 $600,000 $240,000 $20,000 $40,000 $900,000 $696,875 D i) Prime cost Direct material Direct Labor Prime cost $200,000 $80,000 $280,000 ii) Conversion cost Direct Labor Manufacturing overheads Conversion cost $80,000 $365,000 $445,000 37,500 iii) Inventoriable cost Closing units Manufacturing cost per unit Cost of Ending Finished goods inventory $6.45 $241,875 iv) Non-manufacturing cost Advertising expenses Selling and administrative salaries Building rent Other selling and administrative expenses Non-manufacturing cost $600,000 $240,000 $20,000 $40,000 $900,000 E T- Accounts $645,000 Material Inventory Salaries and wages payable Manufacturing overheads Ending Balance Work-in-process Inventory Account $200,000 Finished goods $100,000) $345,000 $0 Finished Goods $645,000 Cost of goods sold Work in process Inventory Account $403,125 Ending Balance $241,875