Question

The following information pertains to the most recent quarter at Precious Production Limited.

Purchases of raw materials	$	372,000
Raw materials inventory, beginning		43,200
Raw materials inventory, ending		72,000
Depreciation, factory		188,000
Insurance, factory		20,800
Direct labour		245,600
Maintenance, factory		123,200
Administrative expenses		286,400
Sales		1,992,000
Utilities, factory		112,000
Supplies, factory		4,080
Selling expenses		327,200
Indirect labour		265,600
Work in process inventory, beginning		28,400
Work in process inventory, ending		121,600
Finished goods inventory, beginning		41,200
Finished goods inventory, ending		164,800

Required:

1. Prepare a schedule of cost of goods manufactured.

2. Prepare an income statement.

3. Assume that the company produced the equivalent of 18,000 units of product during the year. What was the average cost per unit for direct labour? What was the average cost per unit for factory insurance? (Round your answers to 2 decimal places.)

4. Assume that the company expects to produce 20,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For factory insurance? (In preparing your answer, assume that direct materials is a variable cost and that insurance is a fixed cost; also assume that insurance is computed on a straight-line basis.) (Do not round intermediate calculations. Round "Average cost per unit" answers to 2 decimal places.)

5. Not available in Connect.

6. Assuming the company produced 25,000 fully and partially finished units during the year, determine the cost components of the finished goods inventory, which is composed of 5,000 finished units.

Answer 1

As per HOMEWORKLIB POLICY we are required to solve the first 4 parts only. For remaining parts you have to post separate question. For first4 parts refer to the supporting sheet.

Answer Part 1 it in 3,43,200 2,45,600 Precious Productions Limited Statement of cost of goods Manufactured For the quarter Ended 5 Direct Material Used 7 Beginning raw material 43,200 3 Purchases 3,72,000 Total raw material available for use 4,15,200 0 Less ending inventory 72,000 $ 1 Direct Labour $ 2 Manufacturing overheads 3 Depreciation 1,88,000 4 Insurance 20,800 5 Maintaince 1,23,200 6 Utilities 1,12,000 7 supplies 4,080 8 indirect labour 2,65,600 9 Total manufacturing overheads $ 0 Total manufacturig cost incurred during the period 1 Beginning work in process 2 Total cost of goods available for manufacture 3 Less ending inventory 4 Cost of goods manufactured 7,13,680 $ $ $ $ $ 13,02,480 28,400 13,30,880 1,21,600 12,09,280

26 Part 2) Precious Productions Limited Income Statement For the quarter Ended $ 19,92,000 30 Sales 31 Cost of goods sold 32 Beginning Finished Goods 33 Goods manufactured 34 Less ending Finished Goods $ $ $ 41,200 12,09,280 1,64,800 36 Gross Margin 37 Adminstrative expenses 38 Selling expenses $ $ $ $ 10,85,680 9,06,320 2,86,400 3,27,200 10 Net Profit $ 2,92,720 12 Part 3) 13 Average cost per unit of direct labour = direct labour cost/18000 14 = 245600/18000 15 - $13.64 17 Average cost per unit of insurance cost = insurance cost/18000 18 = 20800/18000 19 - $ 1.16

Part 4) Total cost for direct material = direct material for 18000 units *20000/18000 = 343200*20000/18000 - $ 381333 Average cost for direct material = cost for 20000 units / 20000 = 381333/20000 = $ 19.07 Factory insrance cost will remain same that is $ 20800 for 20000 units Average cost per unit of factory insurance for 20000 units = factory insurance /20000 = 20800/20000 = $ 1.04