Question

The following data refer to Twisto Pretzel Company for the year 20x1.

Work-in-process inventory, 12/31/x0	$	8,100
Selling and administrative salaries		13,600
Insurance on factory and equipment		3,600
Work-in-process inventory, 12/31/x1		8,200
Finished-goods inventory, 12/31/x0		14,000
Cash balance, 12/31/x1		6,000
Indirect material used		4,900
Depreciation on factory equipment		2,100
Raw-material inventory, 12/31/x0		10,100
Property taxes on factory		2,400
Finished-goods inventory, 12/31/x1		15,400
Purchases of raw material in 20x1		39,000
Utilities for factory		6,000
Utilities for sales and administrative offices		2,300
Other selling and administrative expenses		4,000
Indirect-labor cost incurred		29,000
Depreciation on factory building		3,600
Depreciation on cars used by sales personnel		1,200
Direct-labor cost incurred		79,000
Raw-material inventory, 12/31/x1		11,000
Accounts receivable, 12/31/x1		4,100
Rental for warehouse space to store raw material		3,000
Rental of space for company president’s office		1,600
Applied manufacturing overhead		58,000
Sales revenue		207,800
Income tax expense		5,100

Required:

1. Prepare Twisto Pretzel Company’s schedule of cost of goods manufactured for 20x1.

2. Prepare the company’s schedule of cost of goods sold for 20x1. The company closes overapplied or underapplied overhead into Cost of Goods Sold.

3. Prepare the company’s income statement for 20x1.

Answer 1

1. Preparing Schedule for Cost of Goods Manufactured for 20x1:-

Twisto Pretzel Company

Schedule Of Cost of Goods Manufactured

For December 31,20x1

Description	Amount	Amount
Direct Material:-
Raw Materials Inventory,12/31/x0	10,100
Add:- Purchases of Raw Materials	39,000
Raw Materials Available for Use	$49,100
Less:- Raw Materials Inventory,12/31/x1	(11,000)
Cost of Raw Materials Used		$38,100
Direct Labor cost incurred		79,000
Manufacturing Overhead:-
Insurance on factory and equipment	$3,600
Indirect material used	4,900
Depreciation on factory equipment	2,100
Property taxes on factory	2,400
Utilities for factory	6,000
Indirect Labor cost incurred	29,000
Depreciation on factory building	3,600
Rental for warehouse space to store Raw Materials	3,000
Total Actual Manufacturing Overhead	$54,600
Add:- Over applied Overhead	3,400
Overhead applied to Work in Process		$58,000
Total Manufacturing Costs		$175,100
Add:- Work in Process Inventory,12/31/x0		8,100
Subtotal		$183,200
Less:- Work in Process Inventory, 12/31/x1		(8,200)
Cost of Goods Manufactured		$175,000

2. Preparing Schedule of Cost of Goods Sold:-

Twisto Pretzel Company

Schedule of Cost of Goods Sold

For December 31,20x1

Description	Amount
Cost of Goods Manufactured	$175,000
Add:- Finished Goods Inventory,20x0	14,000
Cost of Goods Available for Sale	$189,000
Less:- Finished Goods Inventory	(15,400)
Cost of Goods Sold	$173,600
Less:- Over applied Overhead	(3,400)
Adjusted Cost of Goods Sold	$170,200

3. Preparing Income Statement:-

Twisto Pretzel Company

Income Statement

For the Year Ended December 31,20x1

Accounts	Amount	Amount
Sales Revenue	$207,800
Less:- Adjusted Cost of Goods Sold	(170,200)
Gross Profit		$37,600
Less:- Operating Expenses
Selling and Administrative Salaries	$13,600
Depreciation on cars used by sales personnel	1,200
Rental space for Company president's office	1,600
Utilities for sales and administrative office	2,300
Other selling and administrative expenses	4,000
Total Operating Expenses		($22,700)
Operating Income		$14,900
Less:- Income Tax Expense		(5,100)
Net Income		$9,800

Working Note:-

Calculations for Over applied Overhead:-

Over applied Overhead=(Applied Manufacturing Overhead- Actual Manufacturing Overhead)

=($58,000-$54,600)

=$3,400