Q36PGB
Question
Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company
Chewy Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:
Balances: Beginning Ending
Direct Materials \( 13,400 \) 10,500
Work-in-Process Inventory 0 1,500
Finished Goods Inventory 0 5,400
Other information:
Direct materials purchases $ 39,000
Plant janitorial services 900
Sales salaries 5,100
Delivery costs 1,700
Net sales revenue 115,000
Utilities for plant 1,200
Rent on plant 9,000
Customer service hotline costs 1,600
Direct labor 16,000
Requirements
1. Prepare a schedule of cost of goods manufactured for Chewy Bones for the year ended December 31, 2018.
2. Prepare an income statement for Chewy Bones for the year ended December 31, 2018.
3. How does the format of the income statement for Chewy Bones differ from the income statement of a merchandiser?
4. Chewy Bones manufactured 17,500 units of its product in 2018. Compute the company’s unit product cost for the year, rounded to the nearest cent.
Step-by-Step Solution
VerifiedThe COGM is $67,500, net operating income is $44,500. Manufacturing company’s income statement COGS includes COGM and change in finished goods inventory and COGS on income statement of merchandise inventory includes purchases and change in merchandise inventory. The unit product cost is $3.86 per unit.
Chewy Bones | |||
| Schedule of cost goods manufactured | |||
| The year ended December 31, 2018 | |||
| Amount ($) | Amount ($) | Amount ($) |
Beginning WIP Inventory |
|
|
|
Direct Materials Used |
|
|
|
Beginning Direct material | $13,400 |
|
|
Purchases of direct material | $39,000 |
|
|
Direct Materials available for use | $52,400 |
|
|
Ending direct materials | -$10,500 |
|
|
Direct Materials used |
| $41,900 |
|
Direct Labor |
| $16,000 |
|
Manufacturing overhead |
|
|
|
Plant Janitorial services | $900 |
|
|
Utilities for plant | $1,200 |
|
|
Rent on Plant | $9,000 |
|
|
Total Manufacturing Overhead |
| $11,100 |
|
Total manufacturing cost incurred during the year |
|
| $69,000 |
Total manufacturing cost to account for |
|
| $69,000 |
Ending WIP Inventory |
|
| -$1,500 |
Cost of goods manufactured |
|
| $67,500 |
| Chewy Bones | ||
| Income Statement | ||
| The year ended December 31, 2018 | ||
| Amount ($) | Amount ($) |
Revenues: |
|
|
Net Sales Revenue |
| $115,000 |
Cost of goods sold |
|
|
Beginning finished goods inventory | 0 |
|
Cost of goods manufactured | $67,500 |
|
Cost of goods available for sale | $37,500 |
|
Ending finished goods inventory | -$5,400 |
|
Cost of goods sold |
| $62,100 |
Gross Profit |
| $52,900 |
Selling and administrative Expenses |
|
|
Sales Salaries Expense | $5,100 |
|
Delivery Expense | $1,700 |
|
Customer service hotline Expense | $1,600 |
|
Total Selling and administrative Expenses |
| $8,400 |
Operating Income (loss) |
| $44,500 |
In an income statement of the manufacturing company, the cost of goods sold is based on the cost of goods manufactured, and for a merchandising company, the cost of goods sold is based on the cost of merchandise purchased including freight in and the change in merchandise inventory.