Question

Financial statements of a manufacturing firm The following events took place for Rushmore Biking Inc. during February, the first month of operations as a producer of road bikes: • Purchased $390,000 of materials. • Used $353,000 of direct materials in production. . Incurred $101,600 of direct labor wages. • Applied factory overhead at a rate of 41% of direct labor cost. • Transferred $470,600 of work in process to finished goods. . Sold goods with a cost of $447,800. • Revenues earned by selling bikes, $740,900. • Incurred $150,600 of selling expenses. • Incurred $73,300 of administrative expenses.

Answer 1

Solution

Rushmore Biking Inc.
Income Statement
For the Month Ended February 28
Revenues		$     740,900
Cost of Goods Sold		$     447,800
Gross Profit		$     293,100
Selling and Administrative Expenses:
Selling Expenses	$     150,600
Administrative Expenses	$      73,300
Total Selling and Administrative Expenses		$     223,900
Operating Income		$      69,200

.

a. Materials inventory, February 28	$ 37,000
Work in process inventory, February 28	$ 25,656
Finished goods inventory, February 28	$ 22,800

Working

		Working
a. Materials inventory, February 28	$ 37,000	(390000-353000)
Work in process inventory, February 28	$ 25,656
Finished goods inventory, February 28	$ 22,800	(470600-447800)

.

Direct material	$ 353,000
Direct labor	$ 101,600
Overhead applied	$ 41,656
Total manufacturing cost	$ 496,256
Less: Cost of goods manufactured	$ 470,600
Ending work in process inventory	$ 25,656