Financial and Managerial Accounting (Looseleaf) (Custom Package)
Financial and Managerial Accounting (Looseleaf) (Custom Package)
6th Edition
ISBN: 9781259754883
Author: Wild
Publisher: MCG
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Chapter 14, Problem 3PSA

1.

To determine

The cost of goods manufactured.

1.

Expert Solution
Check Mark

Explanation of Solution

Given,

Raw material in the beginning is $166,500.

Raw material in the end is $182,000.

Work in progress in the beginning is $15,700.

Work in progress in the end is $19,380.

Finished goods in the beginning are $167,350.

Finished goods in the end are $136,490.

Calculation of the cost of goods manufactured,

L Company
Particular Amount
($)
Amount
($)
Raw material, opening balance 166,850  
Add: Raw materials purchases 925,000  
Raw material available for use 1,091,850  
Less: Raw materials, ending balance 182,000  
Direct material used   909,850
Direct labor   675,480
Factory overhead:    
Depreciation expense-factory equipment 33,550  
Factory supervision 102,600  
Factory supplies used 7,350  
Factory utilities 33,000  
Indirect labor 56,875  
Miscellaneous production costs 8,425  
Rent expense-factory building 76,800  
Maintenance expense - factory building 35,400  
Total factory overhead   354,000
Total manufacturing costs   1,939,330
Add: work in progress inventory, opening balance   15,700
Total cost of work in process   1,955,030
Less: work I process ending balance   19,380
Cost of goods manufactured   1,935,650

Table (1)

Hence, cost of goods manufactured is $1,935,650.

2.

Prepare the income statement.

Income statement Amount
($)
Amount
($)
Sales   4,462,500
Less: cost of goods sold    
Cost of goods manufactured 1,935,650  
Add: finished goods inventory, beginning 167,350  
Goods available for sale 2,103,000  
Less: finished goods inventory 136,490  
Cost of goods sold   (1,966,510)
Gross profit   2,495,990
Less: Selling expense:    
Advertisement expense 28,750  
Depreciation expense 8,600  
Sales salaries expense 392,560  
Rent expense 26,100  
Total selling expense   (456,010)
Less: General and administrative expenses:    
Depreciation expense-office equipment 7,250  
Office salaries expense 63,000  
Rent expenses 22,000  
Total General and administrative expenses:   (92,250)
Net income before income tax expense   1,947,730
Income tax expense   (233,725)
Net income after income tax   1,714,005

Table (2)

Hence, net income after income tax is $1,714,005.

3.

To determine

(a) Inventory turnover and (b) day’s sales in inventory.

3.

Expert Solution
Check Mark

Explanation of Solution

(a)

For finished goods inventory

Given,

Cost of goods sold is $1,966,510.

Average inventory is $151,920.

Formula to calculate inventory turnover ratio,

Inventoryturnover=CostofgoodssoldAverageinventory

Substitute $1,966,510 for the cost of goods sold and $151,920 for average inventory.

Inventoryturnover=$1,966,510$151,920=12.9

Hence, inventory turnover is 12.9.

Working note:

Given,

Inventory in the beginning is $167,350.

Inventory at the end is $136,490.

Calculation of average inventory,

Averageinventory=Openinginventory+Closinginventory2=$167,350+$136,4902=$151,920

For raw material inventory

Given,

Raw material used is $909,850.

Average raw material inventory $174,425.

Compute the raw material turnover

Rawmaterialturnover=RawmaterialusedAveragerawmaterialinventory

Substitute $909,850 for raw material used and $174,425 for average raw material inventory.

Rawmaterialturnover=$909,850$174,425=5.2

Hence, raw material turnover is 5.2.

Working notes:

Given,

Inventory in the beginning is $166,850.

Inventory at the end is $182,000.

Calculate the average inventory,

Averageinventory=Openinginventory+Closinginventory2=$166,850+182,0002=$174,425

(b)

For finished goods inventory

Given,

Closing inventory is $136,490.

Cost of goods sold is $1,966,510.

Formula to calculate day’s sale in inventory,

Day'ssaleininventory=ClosinginventoryCostofgoodssold×365

Substitute, $136,490 for closing inventory and $1,966,510 for cost of goods sold.

Day'ssaleininventory=$136,490$1,966,510×365=25.3days

Hence, the day’s sale for the finished goods are 25.3 days.

For raw material inventory

Given,

Closing raw material is $182,000.

Raw material used is $909,850.

Formula to calculate day’s sales in raw material inventory,

Day'ssalesininventory=ClosingrawmaterialRawmaterialused×365

Substitute $182,000 for closing raw material and $909,850 for raw material used.

Day'ssalesininventory=$182,000$909,850×365=73days

Hence, the day’s sale for the raw material are 73 days.

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Chapter 14 Solutions

Financial and Managerial Accounting (Looseleaf) (Custom Package)

Ch. 14 - Prob. 6DQCh. 14 - What product cost is both a prime cost and a...Ch. 14 - Prob. 8DQCh. 14 - Prob. 9DQCh. 14 - Prob. 10DQCh. 14 - Prob. 11DQCh. 14 - Prob. 12DQCh. 14 - Prob. 13DQCh. 14 - Prob. 14DQCh. 14 - Prob. 15DQCh. 14 - Prob. 16DQCh. 14 - Prob. 17DQCh. 14 - What are the three categories of manufacturing...Ch. 14 - List several examples of factory overhead.Ch. 14 - Prob. 20DQCh. 14 - Prob. 21DQCh. 14 - Prob. 22DQCh. 14 - Prob. 23DQCh. 14 - Prob. 24DQCh. 14 - Prob. 25DQCh. 14 - Prob. 1QSCh. 14 - Prob. 2QSCh. 14 - QS 14-4 Direct and indirect costs C2 Diez Company...Ch. 14 - Classifying product costs C2 Identify each of the...Ch. 14 - QS 14-6 Product and period costs C3 Identify each...Ch. 14 - Prob. 6QSCh. 14 - Prob. 7QSCh. 14 - Prob. 8QSCh. 14 - Prob. 9QSCh. 14 - Prob. 10QSCh. 14 - Prob. 11QSCh. 14 - Prob. 12QSCh. 14 - Prob. 13QSCh. 14 - Prob. 14QSCh. 14 - Exercise 14-1 Sources of accounting information C1...Ch. 14 - Prob. 2ECh. 14 - Exercise 14-3 Cost classifications for a service...Ch. 14 - Exercise 14-4 Cost classifications for a service...Ch. 14 - Prob. 5ECh. 14 - Prob. 6ECh. 14 - Prob. 7ECh. 14 - Prob. 8ECh. 14 - Prob. 9ECh. 14 - Prob. 10ECh. 14 - Prob. 11ECh. 14 - Prob. 12ECh. 14 - Prob. 13ECh. 14 - Prob. 14ECh. 14 - Prob. 15ECh. 14 - Prob. 16ECh. 14 - Exercise 14-17 Lean business practice C6 Many...Ch. 14 - Prob. 1PSACh. 14 - Prob. 2PSACh. 14 - Prob. 3PSACh. 14 - Prob. 4PSACh. 14 - Prob. 5PSACh. 14 - Prob. 1PSBCh. 14 - Prob. 2PSBCh. 14 - Prob. 3PSBCh. 14 - Prob. 4PSBCh. 14 - Prob. 5PSBCh. 14 - Prob. 14SPCh. 14 - Prob. 1BTNCh. 14 - Prob. 2BTNCh. 14 - Prob. 3BTNCh. 14 - Prob. 4BTNCh. 14 - Prob. 5BTNCh. 14 - Prob. 6BTNCh. 14 - Prob. 7BTNCh. 14 - Prob. 8BTNCh. 14 - Prob. 9BTN
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