Answer:
a. Cost of goods manufactured statement.
$ $
Initial work-in-process inventory 13,040
Raw Materials:
Initial materials inventory 46,800
Add Purchases of raw materials 320,000
Available for Production 366,800
Final materials inventory (66,800) 300,000
Direct labor expenses 200,000
Indirect labor expenses 40,000
Factory rent 42,000
Depreciation for machinery 60,000
Factory utilities 11,900
Final work-in-process inventory (14,940)
Total cost of goods manufactured 652,000
b. Average cost per unit produced in the year.
Average cost = Total Cost ÷ Total units produced
= $652,000 ÷ 4,000
= $163.00
c. Create an income statement for external stakeholders.
$
Sales (3,800 × $400) 1,520,000
Minus Cost of Goods Sold ($163.00 × 3,800) (619,400)
Gross Profit 900,600
Minus Expenses:
Salary for sales supervisor (90,000)
Commissions to sales personnel (180,000)
General administrative costs (300,000)
Net Income / (Loss) 330,600
Explanation:
Calculation of leather recliners sold throughout the year.
Units Sold = Opening Finished Inventory + Units Produced - Ending Finished Inventory
= 500 + 4,000 - 700
= 3,800
Additional Notes:
Solely include manufacturing expenses in the goods manufactured statement.
External stakeholders prefer an income statement formatted to meet absorption costing principles according to financial reporting norms.
