Question

Jacob Corporation is a manufacturer that produces cosmetics. The following information has been taken from the company’s production, sales, and cost records for the just-completed year: Production in units 100,000 Sales in units ? Ending finished goods Inventory in units ? Sales in Rupees Rs 2,000,000 Costs : Other selling and administrative expenses Rs 40,000 Other factory overhead costs Rs 22,000 Selling and administrative salaries Rs 240,000 Maintenance Factory Rs 50,000 Utilities-factory Rs 60,000 Building Rent (Production Uses 80% of the Space; administrative and sales offices use the rest) Rs 100,000 Royalty paid for use of Production patent, Rs 0.5 per unit produced) ? Rent for special production equipment, Rs 5000 per year plus Rs 0.2 per unit produced) ? Insurance factory equipment Rs 20,000 Cleaning supplies, factory Rs 10,000 Depreciation Factory Rs 18,000 Advertising cost Rs 600,000 Direct labor Rs 80,000 Indirect labor Rs 20,000 Property taxes, factory Rs 10,000 Raw material purchased Rs 200,000 The finished goods inventory is being carried at the average unit production cost for the year. The selling price of the product is Rs 32 per unit. Required: A. Prepare a Cost of Goods Manufactured Statement for the year. B. Compute the number of units and cost of units in the finished goods inventory at the end of the year. C. Prepare an Income Statement for the year under the Absorption costing Method. D. Compute the following cost: i. Prime cost ii. Conversion cost iii. Inventoriable cost iv. Non-Manufacturing cost E. Prepare T-accounts of the following: i. Work in process ii. Finished goods

Answer 1

А $200,000 $80,000 Jacob Manufacturing Schedule of Cost of Goods Manufactured Raw material purchase and used in production Direct labor Manufacturing overheads Indirect labor $20,000 Maintenance Factory $50,000 Utilities factory $60,000 Building rent (80% of $100,000) $80,000 Royalty (100,000*$0.50) $50,000 Rent for special equipment ($5,000+ 100,000*$0.20) $25,000 Factory equipment insurance $20,000 Cleaning supplies, Factory $10,000 Depreciation Factory $18,000 Property taxes, Factory $10,000 Other factory overheads $22,000 Total Manufacturing overheads Cost of goods manufactured $365,000 $645,000 B Closing units Production units Sales units Closing units Manufacturing cost per unit Cost of Ending Finished goods inventory 100,000 62,500 ($2,000,000/$32) 37,500 a $6.45|b $241,875 a*b Per unit Manufacturing cost per unit Cost of goods manufactured Total output $645,000 $6.45 100,000 с $2,000,000 Jacob Manufacturing Income Statement Sales Less: Cost of goods sold Cost of Goods manufactured Less: Ending Finished Goods inventory Cost of Goods sold Gross profit Less: Operating expenses Selling and administrative expenses Advertising expenses Selling and administrative salaries Building rent (20% of $100,000) Other selling and administrative expenses Total operating expenses Net Income from Operations $645,000 $241,875 $403,125 $1,596,875 $600,000 $240,000 $20,000 $40,000 $900,000 $696,875 D i) Prime cost Direct material Direct Labor Prime cost $200,000 $80,000 $280,000 ii) Conversion cost Direct Labor Manufacturing overheads Conversion cost $80,000 $365,000 $445,000 37,500 iii) Inventoriable cost Closing units Manufacturing cost per unit Cost of Ending Finished goods inventory $6.45 $241,875 iv) Non-manufacturing cost Advertising expenses Selling and administrative salaries Building rent Other selling and administrative expenses Non-manufacturing cost $600,000 $240,000 $20,000 $40,000 $900,000 E T- Accounts $645,000 Material Inventory Salaries and wages payable Manufacturing overheads Ending Balance Work-in-process Inventory Account $200,000 Finished goods $100,000) $345,000 $0 Finished Goods $645,000 Cost of goods sold Work in process Inventory Account $403,125 Ending Balance $241,875