Manufacturing Income Statement, Statement of Cost of Goods Manufactured Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December: On Company $86,215 (a) 218,900 253,115 Materials inventory, December 1 Materials inventory, December 31 Materials purchased Cost of direct materials used in production Direct labor 325.020 Off Company $110,300 124,715 (b) 248.275
The Correct Answer and Explanation is :
To complete the missing elements in the income statement and cost of goods manufactured (COGM) statement for both On Company and Off Company, we need to use the basic formulas for these financial statements. Here’s a breakdown of how to calculate the missing data:
1. Cost of Direct Materials Used in Production (Direct Materials)
This is calculated by the formula:
[
\text{Direct Materials Used} = \text{Materials Inventory, Beginning} + \text{Materials Purchased} – \text{Materials Inventory, Ending}
]
For On Company:
[
\text{Direct Materials Used} = 86,215 + 218,900 – 253,115 = 52,000
]
For Off Company:
[
\text{Direct Materials Used} = 110,300 + 248,275 – 124,715 = 233,860
]
2. Cost of Goods Manufactured (COGM)
This is calculated by adding direct materials used, direct labor, and manufacturing overhead, then adjusting for the changes in work-in-process inventory:
[
\text{COGM} = \text{Direct Materials Used} + \text{Direct Labor} + \text{Manufacturing Overhead} + \text{Work-in-Process Inventory, Beginning} – \text{Work-in-Process Inventory, Ending}
]
Unfortunately, information related to work-in-process inventory, manufacturing overhead, and possibly beginning and ending inventories isn’t provided. If this data were available, we could calculate the COGM using the formula.
3. Income Statement:
To prepare an income statement, we would need additional information about sales revenue, operating expenses, and net income. The cost of goods manufactured and direct labor can be used as part of the calculation for cost of goods sold (COGS), but the missing sales and other expenses would be necessary to determine the final net income.
Given the missing information, this outlines how you can approach the problem. However, without the full context or more data, it’s challenging to provide the complete answer, but you can apply these formulas once you fill in all variables.