3. Visic Corporation
Income Statement
Sales... $1,300,000
Less cost of goods sold:
Finished goods inventory, beginning ... $ 0
Add: Cost of goods manufactured... 870,000
Goods available for sale ... 870,000
Finished goods inventory, ending... 90,000 780,000
Gross margin... 520,000
Less operating expenses:
Advertising ... 105,000
Entertainment and travel ... 40,000
Building rent (20% × $40,000)... 8,000
Selling and administrative salaries... 210,000
Other selling and administrative expense... 17,000 380,000
Net operating income... $ 140,000
Problem 2-29 (45 minutes)
Case 1 Case 2 Case 3 Case 4
Direct materials... $ 4,500 $ 6,000 $ 5,000 $ 3,000
Direct labor... 9,000 * 3,000 7,000 4,000
Manufacturing overhead .... 5,000 4,000 8,000 * 9,000
Total manufacturing costs .. 18,500 13,000 * 20,000 16,000 *
Beginning work in process
inventory... 2,500 2,000 * 3,000 4,500 *
Ending work in process
inventory... (3,000)* (1,000) (4,000) (3,000)
Cost of goods manufac-
tured ... $18,000 $14,000 $19,000 * $17,500
Sales ... $30,000 $21,000 $36,000 $40,000
Beginning finished goods
inventory... 1,000 2,500 3,500 * 2,000
tured ... 18,000 14,000 19,000 * 17,500
Goods available for sale ... 19,000 * 16,500 * 22,500 * 19,500 *
Ending finished goods in-
ventory ... (2,000)* (1,500) (4,000) (3,500)
Cost of goods sold... 17,000 15,000 * 18,500 16,000 *
Gross margin ... 13,000 6,000 * 17,500 24,000 *
Operating expenses ... (9,000)* (3,500) (12,500) * (15,000) *
Net operating income ... $ 4,000 $ 2,500 * $ 5,000 $ 9,000
* Missing data in the problem.
Case 2-30 (60 minutes)
The following cost items are needed before a schedule of cost of goods
manufactured can be prepared:
Materials used in production:
Prime cost... $410,000
Less direct labor cost ... 180,000
Direct materials cost ... $230,000
Manufacturing overhead cost:
Direct labor cost = $180,000
Percentage of conversion cost 30%*
= $600,000 total conversion cost
*100% – 70% = 30%.
Conversion cost... $600,000
Manufacturing overhead cost... $420,000
Cost of goods manufactured:
Goods available for sale ... $810,000
Less finished goods inventory, beginning... 45,000
Cost of goods manufactured... $765,000
The easiest way to proceed from this point is to place all known amounts in
a partially completed schedule of cost of goods manufactured and a par-
tially completed income statement. Then fill in the missing amounts by
analysis of the available data.
Case 2-30 (continued)
Direct materials:
Raw materials inventory, beginning... $ 18,000
Add: Purchases of raw materials ... 290,000
Raw materials available for use... 308,000
Deduct: Raw materials inventory, ending... A
Raw materials used in production (see above) ... 230,000
Direct labor cost... 180,000
Manufacturing overhead cost (see above) ... 420,000
Total manufacturing costs... 830,000
Add: Work in process inventory, beginning... 65,000
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