Students Based on what you learned in chapter 14, you will need to complete the
ID: 2435598 • Letter: S
Question
Students Based on what you learned in chapter 14, you will need to complete the following problem. You can use excel and attach the file as part of your reply. The following information is available for Cbllins Company 1/1/14 balance 2014 Activity 12/31/14 Balance Raw materials inventory balances Work in process inventory balances Finished goods inventory balances Materials purchased and used Direct labor Manufacturing overhead Sales revenue Account Payable Account Receivable $22,000 20,300 27,000 $30,000 17,200 29,000 $170,000 200,000 183,000 875,000 475,000 910,500 Instructions (a) Compute cost of goods manufactured. (b) Prepare an income statement through gross profit. (c) Explain how the differences between product and period costs and how they are reported as part of the financial statements. Search entries or author Unread F4 F5 F7 F8 F9Explanation / Answer
(a)
(b)
(c) Costs necessary and incurred for manufacturing the product such as direct materials, direct labor and manufacturing overheads are treated as product costs. Costs associated and incurred with selling the product and administrative expenses are treated as period costs. They are not necessary for manufacturing the product. Product costs are inventorised and reported in the balance sheet while period costs are reported as expenses in the income statement in the period in which incurred.
Cost of goods manufactured Beginning raw materials inventory $ 22000 Raw material purchases 178000 Raw materials available 200000 Ending raw materials inventory -30000 Raw materials used 170000 Direct labor 200000 Manufacturing overhead 183000 Total manufacturing costs 553000 Beginning work in process inventory 20300 Total work in process inventory 573300 Ending work in process inventory -17200 Cost of goods manufactured $ 556100