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 Off
Company
Materials inventory, December 1 $69,420 $93,020
Materials inventory, December 31 (a) 105,110
Materials purchased 176,330 (a)
Cost of direct materials used in production 186,050 (b)
Direct labor 261,710 209,300
Factory overhead 81,220 104,180
Total manufacturing costs incurred in December (b) 601,840
Total manufacturing costs 662,270 826,020
Work in process inventory, December 1 133,290 224,180
Work in process inventory, December 31 112,460 (c)
Cost of goods manufactured (c) 596,260
Finished goods inventory, December 1 117,320 104,180
Finished goods inventory, December 31 122,870 (d)
Sales 1,023,250 930,200
Cost of goods sold (d) 601,840
Gross profit (e) (e)
Operating expenses 133,290 (f)
Net income (f) 206,500
Required:
The Correct Answer and Explanation is :
To solve for the missing data in the manufacturing income statement and statement of cost of goods manufactured, we can use the known formulas for both. Let’s start by identifying the relationships between the variables in the income statement and cost of goods manufactured statement.
Company Off
We are given the following relationships:
1. Materials Inventory
- Beginning Materials Inventory (December 1): $93,020
- Ending Materials Inventory (December 31): $105,110
- Materials Purchased: (a), which we need to find.
The formula for the Cost of Direct Materials Used is:
[ \text{Cost of Direct Materials Used} = \text{Beginning Materials Inventory} + \text{Materials Purchased} – \text{Ending Materials Inventory} ]
From the data, we know:
[ 186,050 = 93,020 + a – 105,110 ]
Solving for (a):
[ a = 186,050 – 93,020 + 105,110 ]
[ a = 198,140 ]
So, the Materials Purchased is $198,140.
2. Cost of Goods Manufactured
The formula for Cost of Goods Manufactured is:
[ \text{Cost of Goods Manufactured} = \text{Total Manufacturing Costs} + \text{Work in Process Inventory (Beginning)} – \text{Work in Process Inventory (Ending)} ]
We are given:
[ 596,260 = 826,020 + 224,180 – c ]
Solving for (c):
[ c = 826,020 + 224,180 – 596,260 ]
[ c = 454,940 ]
So, the Ending Work in Process Inventory is $454,940.
3. Finished Goods Inventory
The formula for Cost of Goods Sold is:
[ \text{Cost of Goods Sold} = \text{Cost of Goods Manufactured} + \text{Finished Goods Inventory (Beginning)} – \text{Finished Goods Inventory (Ending)} ]
We know:
[ 601,840 = 596,260 + 104,180 – d ]
Solving for (d):
[ d = 596,260 + 104,180 – 601,840 ]
[ d = 98,600 ]
So, the Ending Finished Goods Inventory is $98,600.
4. Gross Profit
Gross Profit is calculated as:
[ \text{Gross Profit} = \text{Sales} – \text{Cost of Goods Sold} ]
We know:
[ e = 1,023,250 – 601,840 ]
[ e = 421,410 ]
So, the Gross Profit is $421,410.
5. Operating Expenses and Net Income
Operating Expenses are given as $133,290. Net Income is:
[ f = 421,410 – 133,290 ]
[ f = 288,120 ]
Thus, the Net Income is $288,120.
Summary of the Answers:
- (a) Materials Purchased: $198,140
- (b) Total Manufacturing Costs Incurred in December: $662,270
- (c) Ending Work in Process Inventory: $454,940
- (d) Ending Finished Goods Inventory: $98,600
- (e) Gross Profit: $421,410
- (f) Net Income: $288,120
These calculations follow standard accounting formulas for manufacturing income statements, where we account for materials used, direct labor, overhead, inventories, and sales. Each calculation relies on basic principles of cost of goods sold, manufacturing costs, and inventory adjustments to determine the missing values.