Question

than 3 STucients vWl HoI Be accepte East Manufacturing Company is a manufacturer that produces a single product. The following information has been taken from the company's production, sales, and cost records for the month of January 2020. Purchases, raw material Maintenance, factory Direct labour Depreciation, factory equipment Indirect Material, factory Insurance' Depreciation, sales equipment Advertising expenses Depreciation, administrative office equipment Cleaning Supplies, factory Salary expense, Accounting department Salary expense, Human Resources Salary expense, Sales Salary, factory supervisor Salary, factory security Office supplies' Depreciation, manufacturing building 78,000 18,000 135,000 12,500 6,700 3,000 950 3,200 1,800 750 13,200 4,000 5,000 3,500 2,400 1,200 1,000 1,400 250 Rent Property taxes, manufacturing building Utilities 2,400 Additional information: 1. Insurance, utilities, rent and office supplies should be allocated as follows: Administration Sales 10% Factory 20% 70% Insurance Office supplies 60% 30% 10% 75% 20% 25% 10% Rent 70% Utilities 2. Inventory balances at the beginning and end of January were as follows: January 31 22,000 35,000 23,000 Jamuary 1 18,000 30,000 21,000 Raw materials Work in process Finished goods (Continued on the reverse s
please provide explanations, i am completely lost!

Answer 1

Direct Material, direct labor and direct expenses are form part of Prime cost.

All indirect Materials and indirect cost are form part of Overheads.

Cost of Goods manufactured consists of cost up to work in process.

Cost of goods sold consists of cost up to Finished goods.

In additional Information 1, items of related to factory will form part of manufacturing cost.

For Insurance, 70%*3000 is for factory purpose and is included in manufacturing cost.

For remaining calculations, please go through the following attachment.

h a) Schedule of Cost of goods manufactured PARTICULARS Amount $ Amount $ Raw Material: Opening Inventory 18,000.00 + Purchases 78,000.00 a+b=C Raw Material Available for use 96,000.00 - Closing Inventory 22,000.00 e=C-d Cost of Raw Material used: 74,000.00 Direct Labour 1,35,000.00 g=e+f Prime Cost 2,09,000.00 2,09,000 Manufacturing Overhead: Maintenance, Factory 18000 Depreciation, factory equipment 12500 Indirect Material, Factory 6700 Insurance=3000*70% 2100 Cleaning supplies, factory 750 m Salary, factory supervisor 3500 Salary, factory security 2400 Office supplies=1200*10% 120 Depreciation, Manufacturing Building 1000 Property taxes, Manufacturing Building 250 Utilities=2,400*70% 1680 s=h tor Total Manufacturing Overheads 49000 49,000 + Work in Process Opening Inventory 30,000 - Work in Process Closing Inventory -35,000 v=g+s+t-u Cost of Goods Manufactured 2,53,000 b) Multiple step Income statement PARTICULARS Amount $ Amount $ Sales 348000 Less: Cost of Goods sold Cost of Goods Manufactured 2,53,000 + Finished goods opening Inventory 21000 - Finished goods Ending Inventory -23000 e=b+c-d Cost of goods sold 2,51,000 2,51,000 f=a-e Gross Profit 97,000 Less: Operating Expenses Selling Expenses Insurance=3000*10% 300 Depreciation, Sales equipment 950 Advertising Expenses 3200 Salary expense, sales 5000 Office supplies=1200*30% 360 Rent=1400*25% 350 Utilities=2400*10% 240 Sales Commission=348000*2% 6960 Total Selling Expenses 17360 17360 Administrative Expenses Depreciation, administrative office equipment 1800 Salary expense, accounting department 13200 Salary expense, Human resources 4000 Insurance=3000*20% 600 Office supplies=1200*60% 720 Rent=1400*75% 1050 Utilities=2400*20% Total Administrative expenses 21850 21850 i=f-g-h Operating Income 57,790 480