Maryville, Inc., incurred the following costs during August: During the month, 5
ID: 2441037 • Letter: M
Question
Maryville, Inc., incurred the following costs during August:
During the month, 5,500 units of product were manufactured and 4,000 units of product were sold. On August 1, Maryville, Inc., carried no inventories. On August 31, there were no inventories other than finished goods.
Required:
a. Calculate the cost of goods manufactured during August and the average cost per unit of product manufactured.
b. Calculate the cost of goods sold during August.
c-1. Calculate the difference between cost of goods manufactured and cost of goods sold.
c-2. How will this amount be reported in the financial statements?
d. Prepare a traditional (absorption) income statement for Maryville, Inc., for the month of August . Assume that sales for the month were $232,371 and the company's effective income tax rate was 30%.
Raw materials used $ 30,400 Direct labor 50,500 Manufacturing overhead, actual 40,100 Selling expenses 25,130 Administrative expenses 20,670 Interest expense 10,000Explanation / Answer
a) Cost of goods manufactured = Raw material used+Direct labor+Manufacturing overhead
= $30,400+$50,500+$40,100 = $121,000
Average cost per unit = Cost of goods manufactured/Units produced
= $121,000/5,500 units = $22 per unit
b) Cost of goods sold during August = Units sold*Average cost per unit
= 4,000 units*$22 per unit = $88,000
c) The difference between cost of goods manufactured and cost of goods sold will be reported as Finished Goods Inventory in the financial statements. The calculation of Finished goods inventory is shown as follows:-
Finished Goods Inventory = Cost of goods manufactured - Cost of goods sold
= $121,000 - $88,000 = $33,000
d) Maryville, Inc.,
Traditional Income Statement
For the Month of August (Amounts in $)
Sales 232,371 Less: Cost of goods sold (88,000) Gross Profit (A) 144,371 Operating Expenses: Selling expenses 25,130 Administrative expenses 20,670 Interest expense 10,000 Total Operating Expenses (B) 55,800 Net Income before Income tax expense (A-B) 88,571 Less: Income tax expense ($88,571*30%) (26,571) Net Income 62,000