The following selected information was extracted from the 20x1 accounting record
ID: 2425618 • Letter: T
Question
The following selected information was extracted from the 20x1 accounting records of Lone Oak Products: Seventy-five percent of the company's building was devoted to production activities; the remaining 25 percent was used for selling and administrative functions. Inventory data: "The January 1 and December 31 finished-goods inventory consisted of 1,350 units and 1,190 units, respectively. Required: Calculate Lone Oak's manufacturing overhead for the year. Calculate Lone Oak's cost of goods manufactured. Compute the company's cost of goods sold. Determine net income for 20x1, assuming a 30% income tax rate. Determine the number of completed units manufactured during the year.Explanation / Answer
Solution:
(1) Lone Oak's Manufacturing overheads for the year 2001:
Manufacturing overheads can be computed using the following:
Raw material purchases
Direct labor
Indirect labor
Building depreciation (75%)
Other factory costs (assumed to be completely related to manufacturing of the product)
Manufacturing overhead for the year:
$175,000 + $254,000 + $109,000 + $60,000 + $344,000 = $942,000
(2) Cost of Goods manufactured:
(3) Cost of Goods sold (COGS):
COGS = Beginning finished goods inventory + Cost of goods manufactured + Selling and manufacturing expenses + Bldg dep (25%) - Ending finished goods inventory
= $111,100 + $913,200 + $133,000 + $195,000 + $20,000 - $97,900
= $1,274,400
(4) Net income of Lone Oak for 2001:
5. Number of completed units manufactured during the year:
No. of completed units manufactured during the year = Opening inventory of Finished goods + purchases - Closing inventory of finished goods
No of completed units = Sales + closing stock of Finished goods
Sales in units = 1,495,000 / $130 = 11,500 units
No. of completed units manufactured during the year = 11,500 + 1,190 = 12,690 units
Amt ($) Direct Materials Used DM inventory at the beginning of the year $15,800 Add: DM purchases 175,000 DM available 190,800 Less: DM closing inventory 18,200 Total DM used 172,600 Manufacturing Overheads Direct labor 254,000 Indirect labor 109,000 Building Dep 60,000 Factory costs 344,000 Product costs incurred 767,000 Change in WIP Add: Beginning WIP 35,700 Less: Closing WIP (62,100) Cost of goods manufactured 913,200