Question

Bubba Manufacturing Company provided the following information for the fiscal year to June 30, 2020:

Inventories	01/07/2019	30/06/2020
Direct Materials	$72,000	$65,000
Work-in-Process	107,000	128,000
Finished Goods	149,500	141,700

Other information:

Office cleaner’s wages	4,500
Sales Revenue	1,031,000
Raw materials purchased	235,000
Factory wages	239,700
Indirect materials	23,500
Delivery truck driver’s wages	15,400
Indirect labor	9,500
Depreciation on factory plant & equipment	32,000
Insurance 1	60,000
Depreciation on delivery truck	7,250
Utilities 2	118,750
Administrative salaries	41,250
Special Design Costs	5,000
Selling expenses	9,000
Sales Commission	2% of gross profit

1 Of the total insurance, 66⅔% relates to the factory facilities & 33⅓% relates to general

& administrative costs.

2 Of the total utilities, 80% relates to the manufacturing facilities & 20% relates to the office area.

Prepare an income statement for Bubba Manufacturing for the year ended June 30, 2020, clearly showing cost of goods sold.

f)      During the year, Bubba Manufacturing Company produced 4,000 units of product. What was the production cost of each unit?

g)    How does the format of the income statement for a manufacturing entity differ from the income statement of a merchandising entity?

Answer 1

242000 239700 481700 For the Year End June 30 2020 Direct material consumed: Inventory 1 July 2019 72000 Add Cost of Raw material Purchased 235000 Total Raw material Available 307000 Less Inventory 30 June 2020 -65000 Raw material consumed Direct Labor Prime cost Factory Overhead Indirect materials 23500 Indirect labor 95001 Depreciation on Plant 32000 Insurance 40000 Utilities 118750 80% 95000 SpecialDesign cost 5000 Total Manufacturing Overhead: Total Manufacturing cost Add Work in progress 31 Oct. 205000 686700 107000 793700 - 128000 665700 Less Work in progress Nov. 30 Cost of Goods Manufactured Production cost of each unit = 665700/4000 166.425

$ 1031000 -673500 357500 Income Statement for the Year end June 30 2020 $ $ Sales Less Cost of goods sold: Finished Goods at the beginning 149500 Cost of Goods Manufactured 665700 Cost of finished goods available for sale 815200 Less Finished Goods at the end -141700 Cost of goods sold Gross profit Operating expenses: Administration expenses Office cleaners wages 45001 Insurance 20000 Utilities 118750 *20% 23750 Administrative salaries 41250 Total Administration expenses 65000 Selling Expenses: Delivery truck Drivers wages 15400 Depreciation on Delivery truck 7250 Selling expenses 9000 Selling Commission 2% on 357500 71501 Total Selling Expenses 38800 Total Operating expenses Net Profit -103800 253700

Ina manufacturing concern Cost of goods sold is separately calculated by a manufacturing statement.

So manufacturing and separate income statement is prepared.

In merchandising company prepares only income statement.