statement of cost of goods manufactured.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Imperial Shoe Company, a manufacturing firm, has supplied the following information from its accounting records for the month of November 2021:
Factory supplies used $18,000
Depreciation of factory equipment 17,000
Depreciation of office building 23,000
Salary of factory manager 36,000
Marketing and promotion costs 4,500
Other materials used 1,250
Direct labor cost (5,000 hours used) 22,000
Purchase of raw materials 10,000
Finished goods inventory Nov. 1 2,250
Work in process inventory Nov. 1 4,200
Raw materials inventory Nov. 1 3,500
Finished goods inventory Nov. 30 3,750
Work in process inventory Nov. 30 2,750
Raw materials inventory Nov. 30 5,100
.
Required:
A. Prepare a statement of cost of goods manufactured.
B. Prepare a statement of cost of goods sold.
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