Question

Consider the following information for Winslow Door Manufacturing co. for the year ended December 31, 2018:

                        Depreciation expense – Administrative office                        $ 50,000

                        Depreciation expense – Plant and equipment                         100,000

                        Direct labor – Wages                                                               600,000

                        Direct materials inventory, Dec. 31, 2018                                  70,000

                        Direct materials inventory, Jan 1, 2018                                      40,000

                        Direct material purchases                                                        300,000

                        Finished goods inventory, Dec. 31, 2018                                   60,000

                        Finished goods inventory, Jan 1, 2018                                       50,000

                        Heat, light & power – Plant                                                        60,000

                        Indirect labor                                                                               60,000

                        Property taxes – Plant                                                                 40,000

                        Sales representatives’ salaries                                                   200,000

                        Accounts receivable                                                                  500,000

                        Plant supervisor’s salary                                                             70,000

                        Supplies – Administrative office                                                10,000

                        Supplies – Plant                                                                          30,000

                        Work-in-Process inventory, Dec 31, 2018                                 30,000

                        Work-in-Process inventory, Jan 1, 2018                                    50,000

                        Accounts payable                                                                      200,000     

                        Property, plant, and equipment                                                 700,000

Required:

1. Determine the total amount of cost of goods manufactured for 2018.
2. Compute the cost of goods sold for 2018.
3. What level of sales would have generated operating income of $400,000?
4. From the above list of accounts indicate one item that is an example of a(n):
   1. indirect cost
   2. product cost
   3. period cost
   4. direct cost

Answer 1

Particulars	Details	Amount
Opening raw materials	40,000.00
Add: Raw materials purchased	300,000.00
Less: Closing raw materials	70,000.00
Raw materials consumed		270,000.00
Direct Labor- Wages		600,000.00
Prime cost		870,000.00
Depreciation- plant and equipment	100,000.00
Heat Light & Power- plant	60,000.00
Indirect Labor	60,000.00
Plant Supervisor salary	70,000.00
Supplies plant	30,000.00
Property taxes – Plant	40,000.00
Manufacturing Overhead		360,000.00
Cost of production		1,230,000.00
Add: Opening Work in process		50,000.00
Less: Closing Work in process		30,000.00
Cost of goods manufactured		1,250,000.00	Ans to a
Add: Opening Finished goods		50,000.00
Less: Closing Finished goods		60,000.00
Cost of goods sold		1,240,000.00	Ans to b
Depreciation expense – Administrative office		50,000.00
Sales representatives’ salaries		200,000.00
Supplies – Administrative office		10,000.00
Cost of sales		1,500,000.00
Desired operating income		400,000.00
Desired level of sales		1,900,000.00	Ans to c
indirect cost	Indirect Labor	$60,000
product cost	Raw materials
period cost	Depreciation expense – Administrative office			$50,000
direct cost	Direct Labor- Wages	$600,000