Question

II. Problem solving question- Design works International manufactures custom tiles. The following information relates to the fiscal year ending December 31, 2015 Beginning balance in raw material inventory Purchases of raw material Ending balance in raw material inventory Beginning balance in work-in-process Ending balance in work-in-process Direct labor cost Manufacturing overhead applied Beginning balance in finished goods Ending balance in finished goods Sales Selling expenses General and administrative expenses 200,000 800,000 100,000 400,000 200,000 1,000,000 500,000 600,000 300,000 4,000,000 250,000 550,000 Required a. Prepare a schedule of cost of goods manufactured. Assume there is no indirect material costs. b. Prepare and income statement for the fiscal 2015. Ignore income tax.

Answer 1

Schedule of Cost of goods manufactured:
Beginning Raw Materials	200,000.00
Add: Raw materials purchased	800,000.00
Total materials available for Sale	1,000,000.00
Less: Ending Raw materials	100,000.00
Direct Materials used	900,000.00
Add: Direct labor	1,000,000.00
Add: Manufacturing overhead applied	500,000.00
Total manufacturing cost	2,400,000.00
Add: beginning balance, WIP	400,000.00
Total cost work in process inventory	2,800,000.00
less: Ending balance, WIP	200,000.00
Cost of goods manufactured	2,600,000.00
Cost of Goods sold
Beginning finished Goods inventory	600,000.00
Add: Cost of goods manufactured	2,600,000.00
Cost of goods available for Sale	3,200,000.00
Less: Ending finished goods inventory	300,000.00
Cost of goods sold	2,900,000.00
Income Statement
Sales revenue	4,000,000.00
less: Cost of goods sold	2,900,000.00
Gross profit	1,100,000.00
less: sales & administrative expense:
Selling expenses	250,000.00
General & administrative expense:	550,000.00
Net income	300,000.00