Question

Graded Discussion 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 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 60,000 Depreciation on delivery truck 7.250 Utilities 118.750 Administrative salaries 41,250 Special Design Costs 5,000 Selling expenses 9,000 Sales Commission 2% of gross profit of the total insurance, 66%% relates to the factory facilities & 33%% relates to general & administrative costs. 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. 1) 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

Note: As per the Chegg Gudilines, in case of questions with multiple sub parts, we are instructed to solve the first 4 sub-parts. Hence, I have solved the first 4 sub-parts.

(A)
RM inventory at beginning	72,000
add: RM purchases made	235,000
	307,000
less: RM inventory at end	(65,000)
RM used in production	242,000
less: indirect material	(23,500)
Direct material used in production	218,500
(B)
Manufacturing overheads:
Factory wages	239,700
Indirect labour	9,500
Delivery truck driver wages	15,400
Depreciation on factory plant & equipment	32,000
Insurance (60000*2/3)	40,000
Depreciation on delivery truck	7,250
Utilities (118750*80%)	95,000
Total manufacturing overheads	438,850
( C )
Direct material used in production	218,500
add: Direct labour cost	-
add: Special design cost	5,000
Prime cost	223,500
Direct labour	-
add: Total manufacturing overheads	438,850
Conversion cost	438,850
(D)
Statement of cost of goods manufactured for the year ended 30/06/2020 :
RM inventory at beginning	72,000
add: RM purchases made	235,000
	307,000
less: RM inventory at end	(65,000)
RM used in production	242,000
less: indirect material	(23,500)
Direct material used in production	218,500
add: Direct labour cost	-
add: Special design cost	5,000
Prime cost	223,500
add: Total manufacturing overheads	438,850
Total manufacturing cost	662,350
add: WIP inventory at beginning	107,000
	769,350
less: WIP inventory at end	(128,000)
Cost of goods manufactured	641,350