Question

Mesa Designs produces a variety of hardware products, primarily for the do-it-yourself (DIY) market. As part of your job interview as a summer intern at Mesa, the cost accountant provides you with the following (fictitious) data for the year (in $000). Inventory information: 1/1/00 12/31/00 Direct materials $ 53 $ 60 Work-in-process 81 73 Finished goods 992 1,018 Other information: For the year ’00 Administrative costs $ 2,600 Depreciation (Factory) 3,030 Depreciation (Machines) 4,670 Direct labor 7,000 Direct materials purchased 5,200 Indirect labor (Factory) 1,720 Indirect materials (Factory) 530 Property taxes (Factory) 210 Selling costs 1,120 Sales revenue 32,610 Utilities (Factory) 580 Required: 1. Prepare a cost of goods sold statement. 2. Prepare an income statement.

Answer 1

$9,920 $810 Cost of Goods Sold (in ,$ 00) Finished goods inventory, 01/01/00 Work in process inventory,01/01/00 Direct Materials Inventory, 01/01/00 Purchases B Cost of direct materials available for use (A+B) Less: Direct materails closing inventory Cost of direct matetials used in production I $530 $5,200 $5,730 $600 $5,130 Direct labour II $7,000 Factory overhead III $10,740 Total Manufacturing costs I+II+III $22,870 Less: Closing work in progress $730 Cost of goods manufactured Cost of finished goods availble for sale Less: closing finished goods inventory Cost of goods sold $22,140 $32,060 $10,180 $21,880

Income statement Accounts tittle Sales revenue Less : Cost of goods sold Gross profit Amount Amount $32,610 ($21,880) $10,730 Less: Expenses Administration Selling costs $2,600 $1,120 Total expenses $3,720 Net Income $7,010 Factory overhead Depreciation (Factory) Depreciation (Machines) Indirect labour (Factory) Indirect materials (Factory) Property taxes (Factory) Utilities (Factory) Total Amount $ 3,030 $ 4,670 $ 1,720 $ 530 $ 210 $ 580 S 10,740