Question

10.) Several items are omitted from the income statement and cost of goods sold manufactured statement data for two different companies for the month of December: A Company $ 75,800 (a) 292,800 327,800 B Company $ 175,300 81,140 (b) 397,800 158,400 (b) 246,060 1,509,000 Materials inventory Dec 1 Materials inventory Dec 31 Materials Purchased Cost of direct materials used in production Direct labor Factory Overhead Total Manufacturing costs incurred in December Total manufacturing costs Work in process inventory Dec 1 Work in process inventory Dec 31 Cost of goods manufactured Finished goods inventory Dec 983,000 129,000 1,717,320 198,320 182,200 (c) 234,000 1,522,020 259,0808 Finished goods inventory Dec 207,400 (d) 31 Sales Cost of goods sold Gross profit Operating expenses Net Income 1,137,000 (d) (e) 127,600 (1) 1,934,320 1,534,040 (e) (0) 154,920 Instructions: 1. For both companies, determine the amounts of the missing items (a) through (1), identify them by letter 2. Prepare statement of goods manufactured for December for company A 3. Prepare incomes statements for December for company A 1. Company A 2.480 f.53,000 Company B a. 601,500 b.695.700 c. 393,62

10 is solved

Answer 1

1.

			15000
	Estimated Fixed Cost	Estimated variable Cost(per unit sold)	Amount
Production Costs:
Direct Materials	$                                    -	$                   45.00	$      675,000.00
Direct Labour	$                                    -	$                   40.00	$      600,000.00
Factory Overhead	$                   250,000.00	$                      5.00	$      325,000.00
Selling Expenses:
Sales salaries & Commissions	$                   340,000.00	$                      6.00	$      430,000.00
Advertising	$                   106,000.00	$                          -	$      106,000.00
Travel	$                       6,000.00	$                          -	$          6,000.00
miscellaneous selling expenses	$                       3,300.00	$                      2.00	$        33,300.00
Administrative Expenses:
Office & Officers Salaries	$                   425,000.00	$                          -	$      425,000.00
Supplies	$                       9,000.00	$                      5.00	$        84,000.00
Miscellaneous Administrative Expenses	$                       6,700.00	$                      2.00	$        36,700.00
Total	$               1,146,000.00	$                 105.00	$ 2,721,000.00
A Company
Estimated Income Statement
For the Year Ended December 31
	Amount	Amount
Sales		$     3,900,000.00
Cost of Goods Sold:
Direct materials	$                (675,000.00)
Direct Labour	$                (600,000.00)
Factory Overhead	$                (325,000.00)
Total of Goods sold		$   (1,600,000.00)
Gross Profit		$     2,300,000.00
Expenses:
Selling Expenses:
Sales Salaries & Commissiion	$                (430,000.00)
Advertising	$                (106,000.00)
Travel	$                     (6,000.00)
Miscellaneous Selling Expense	$                   (33,300.00)
Total Selling Expenses		$      (575,300.00)
Administrative Expneses:
Office & officers' Salaries	$                (425,000.00)
Supplies	$                   (84,000.00)
Miscellaneous administrative Expenses	$                   (36,700.00)
Total Administrative Expenses		$      (545,700.00)
Total Expenses		$   (1,121,000.00)
Operating Income		$     3,421,000.00

2.

Contribution Margin ratio= Contribution/Sales

(Sales- Variable Cost)/Sales*100
(3900000-1575000)/3900000*100	59.6%

3.

BEP (in Units)
=Fixed Cost/(Sales per unit- variable Cost per unit)
=1146000/(260-105)	7394
BEP(in Dollars)
=Fixed cost/Contribution Margin amount
=1146000/(3900000-1575000)	$                                0.49

4.

Margin of safety (in dollars)
=Actual Sales-Break Even Sales
=3900000-(7394*260)	1977560
Margin of Safety(% of Sales)
=Margin of Safety(in dollars)/Actual Sales*100
=1977560/3900000*100	51%

5.

Operating Leverage
=Contribution/Net operating Income
=2325000/3421000
=0.68