Question

Bubba Manufacturing Company provided the following information for the fiscal year to June 30, 2020: Inventories Direct Materials Work-in-Process Finished Goods 01/07/2019 30/06/2020 $72,000 $65,000 107,000 128,000 149.500 141,700 Other information: Office cleaner's wages Sales Revenue Raw materials purchased Factory wages Indirect materials Delivery truck driver's wages Indirect labor Depreciation on factory plant & equipment Insurance Depreciation on delivery truck Utilities 2 Administrative salaries Special Design Costs Selling expenses Sales Commission 4,500 1,031,000 235,000 239,700 3.500 15.400 9.500 32,000 60,000 7,250 118,750 41,250 5,000 9,000 2% of gross profit of the total insurance, 66%% relates to the factory facilities & 33% relates to general & administrative costs. 2 of the total utilities, 80% relates to the manufacturing facilities & 20% relates to the office area. Requirements: a) What was the amount of direct materials used in production? b) What was the amount of manufacturing 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 June 30, 2020, clearly showing total manufacturing costs & total manufacturing costs to account for. e) 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?

Please provide Solutions for D,E, F & G

Answer 1

(D)			Schedule of cost of goods manufactured
						$	$
	Direct materials as on 01/07/2019					72000
	Add: Materials purchased					235000
						307000
	Less:
	Direct materials as on 30/06/2019					65000
	Indirect materials					23500
	Direct materials used in production						218500
	Factory wages (Direct labor cost)						239700
	Factory overhead cost				(Note:1)		205000
	Total manufacturing cost						663200
	Add:Work in process 01/07/2019						107000
	Total manufacturing cost to account for						770200
	Less:Work in process 30/06/2020						128000
	Cost of goods manufactured						642200
	Note:1
	Factory overhead cost:
						$
	Indirect materials					23500
	Indirect labor					9500
	Depreciation on factory plant and equipment					32000
	Insurance			(60000*66.67%)		40000
	Utilities			(118750*80%)		95000
	Special design cost					5000
	Total					205000
E)			Income statement
						$	$
	Sales revenue						1031000
	Less: Cost of goods sold
	Cost of goods manufactured					642200
	Add: Finished goods as on 01/07/2019					149500
						791700
	Less: Finished goods as on 30/06/2020					141700	650000
	Gross profit						381000
	Less: Selling and administrative expenses
	Office cleaners wages					4500
	Delivery truck driver's wages					15400
	Insurance			(60000*33.33%)		20000
	Depreciation on delivery truck					7250
	Utilities			(118750*20%)		23750
	Depreciation on delivery truck					18000
	Administrative salaries					41250
	Sales commission			(381000*2%)		7620
	Selling expenses					9000	146770
	Net income						234230

(F)	Unit product cost=Total manufacturing cost/Units produced=106830/4000=$ 26.7075
(G)	Only difference is in computing the cost of goods sold
	Manufacturing entity:
	Cost of goods sold=Beginning inventory+Cost of goods manufactured-Ending inventory
	Merchandising entity:
	Cost of goods sold=Beginning inventory+Cost of goods purchased-Ending inventory
	For manufacturing entity,Separate statement of cost of goods manufactured is required for calculating cost of goods sold
	For merchandising entity,cost of goods purchased is available from purchase registers