Question

Exercise 13-13 Sheffield Company has accumulated the following budget data for the year 2017. 1. Sales: 31,410 units, unit selling price $89. 2. Cost of one unit of finished goods: direct materials 1 pound at $5 per pound, direct labor 3 hours at $12 per hour, and manufacturing overhead $8 per direct labor hour. 3. Inventories (raw materials only): beginning, 10,240 pounds; ending, 15,220 pounds. 4. Selling and administrative expenses: $170,000; interest expense: $30,000. 5. Income taxes: 30% of income before income taxes. Prepare a schedule showing the computation of cost of goods sold for 2017. SHEFFIELD COMPANY Computation of Cost of Goods Sold Cost of one unit of finished goods: Direct materials $ Direct labor Manufacturing overhead Total Cost of Goods Sold

Answer 1

SHEFFIELD COMPANY
Computation of Cost of Goods Sold
Cost of one unit of finished goods:
Direct materials	5
Direct labor ( 3 x 12)	36
Manufacturing overhead ( 8 x 3)	24
Total	65
Cost of goods sold	$2,041,650

Cost of goods sold = Cost per unit x Number of units sold

= 65 x 31,410

= $2,041,650

SHEFFIELD COMPANY
Budgeted Income Statement
Sales ( 31,410 x 89)	2,795,490
Cost of goods sold	-2,041,650
Gross Profit	753,840
Selling and administrative expense	-170,000
Operating Profit	583,840
Interest expense	-30,000
Profit before tax	553,840
Income tax expense ( 553,840 x 30%)	-166,152
Net Income	$387,688

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