Question

2. Prepare an income statement. MERIWELL COMPANY Income Statement For the Year Just Completed Sales $ $ 575,000 $ CA Cost of goods sold: Finished goods inventory, beginning Add: Cost of goods manufactured Goods available for sale Deduct: Finished goods inventory, ending Gross margin Less operating expenses: Selling expenses Administrative expenses 35,000 375,100 410,100 (70,000) 340,100 (84,000) (122,000) (575,000) Sales 781,000

Answer 1

Schedule of Cost of Goods manufactured:
Beginning inventory of WIP			22,000
Current cost
Beginning RM inventory	13,000
Add: Purchase		1,40,000
Total RM available		1,53,000
Less: Ending RM inventory	8,000
Direct material used			1,45,000
Direct labour used			85,000
Manufacturing overheads:
Depreciation-Factory		29,000
Utilities-Factory		11,000
Maintenance -Factory		85,000
Supplies-Factory		13,000
Insurance-Factory		5,600
Indirect labor		13,500
Total Manufacturing overheads		157100
Total Manufacturing cost			3,87,100
Total cost of goods manufacturing		4,09,100
Less: Ending WIP				34,000
Costs of goods manufactured			3,75,100
INCOME STATEMENT
Sales revenue				5,75,000
Less: Cost of goods sold
Finished goods inventory beginning	35,000
Add: Cost of goods manufactured		3,75,100
Total cost of goods available for sale	4,10,100
Less: Ending inventory of Finished goods	-70,000
Cost of goods sold				3,40,100
Gross Profit				2,34,900
Less: Operating expense
Selling expense			84,000
Admin expense			1,22,000
Total Operating expense			-206000
Net Income				28,900
Req 3.
Average cost per unit
Direct material cost (145,000 /10,000)	14.5	per unit
Depreciation cost (29,000/10,000)	2.9	per unit
Req 4-a
				Average cost	Total cost
Direct material			14.5	per unit	290000
Factory depreciation(29000/20000)	1.45	per unit	29,000
Req 4-b
Decrease