Cost Management

Hi Students,
I would like you to study this problem and the solution to help in the preparation of your case study question on cost classification.
Keith

PRACTICE PROBLEM AND SOLUTION

Given the following, prepare manufacturing statement and partial income statement.

Raw materials inventory 1/1/05 8,000 Raw materials inventory 12/31/05 5,000 Work in process inventory 1/1/05 2,000 Work in process inventory 12/31/05 3,000 Finished goods inventory 1/1/05 15,000 Finished goods inventory 12/31/05 16,000 Factory insurance 2,000 Depreciation, factory machinery 2,000 Utilities, factory 500 Utilities, office 500 Repairs, factory 500 Raw materials purchases 15,000 Sales 100,000 Direct labor 20,000 Indirect labor 5,000 Plant manager’s salary 5,000 Property taxes, office building 1,000

SOLUTION

Co. Name | Manufacturing Statement | Year Ending 12/31/xx | | | | | | | | | | Direct Materials | | | | | Raw materials inventory, 1/1 | 8,000 | | | | Raw materials purchases | 15,000 | | | | Total raw materials available for use | 23,000 | | | | Less: Raw materials inventory 12/31 | (5,000) | | | | Direct materials used | | 18,000 | | Direct labor | | 20,000 | | Factory overhead | | | | | Insurance | 2,000 | | | | Depreciation | 2,000 | | | | Utilities | 500 | | | | Repairs | 500 | | | | Indirect labor | 5,000 | | | | Manager salary | 5,000 | | | | Total manufacturing overhead | | 15,000 | | Total manufacturing costs | | | 53,000 | Goods in process inventory, 1/1 | | | 2,000 | Less: Goods in process inventory 12/31 | | | (3,000) | Cost of goods manufactured | | | 52,000 |

Manufacturing Company | | Income Statement | | For Year Ended December 31, xxxx | | | | | | Revenue | | | | Sales | |