Cost of goods manufactured. Consider the following account balances (in thousands) for the Canseco Company:

Beginning of 2007 End of 2007 Direct materials inventory $26,400 $ 31,200 Work-in-process inventory 25,200 24,000 Finished goods inventory 21,600 27,600 Purchases of direct materials 90,000 Direct manufacturing labour 30,000 Indirect manufacturing labour 18,000 Plant insurance 10,800 Amortization—plant building and equipment 13,200 Repairs and maintenance—plant 4,800 Alarketing, distribution, and customer service costs 111,600 General and administrative costs 34,800 Required 1. Prepare a schedule of cost of goods manufactured for 2007.

2. Revenues in 2007 were $360 million. Prepare the 2007 income statement.

Excel Application For students who wish to practise their spreadsheet skills, the following is a step-by-step approach to creating an Excel spreadsheet to work this problem.

Step-by Step 1. In a new spreadsheet, create an income statement and a schedule of cost of goods manufac¬
tured in the same format as Exhibit 2-7 on page 43. Your categories ofindirect manufacturing costs will differ from those in Exhibit 2-7 and should be the following: indirect manufacturing labour, plant insurance, amortization, and repairs and maintenance.

2. In your schedule of cost of goods manufactured, enter the amounts for beginning direct materials inventory, purchases of direct materials, ending direct materials inventory, direct manufacturing labour, indirect manufacturing labour, plant insurance, amortization, repairs and maintenance, beginning work-in-process inventory, and ending work-in process inventory. Follow the format in Panel B of Exhibit 2-7. (Program your spreadsheet to perform all necessary calculations. Do not “hard-code” any amounts, such as gross mar¬

gin or operating income, requiring addition or subtraction operations.)

3. In your schedule of cost of goods manufactured, enter calculations for

(a) cost of direct materials available for use and

(b) direct materials used.

4. In your schedule of cost of goods manufactured, enter calculations for

(a) total indirect manufacturing costs,

(b) manufacturing costs incurred during the period,

(c) total manufac¬

turing costs to account for, and

(d) cost of goods manufactured.

5. In your income statement, enter the calculation that sets the amount of cost of goods manufactured equal to the amount in the cell where you calculated cost of goods manufac¬

tured in step 4.

6. To complete the income statement: enter revenues, and enter the amounts for marketing, distribution, and customer-service costs, general and administrative costs, beginning fin¬

ished goods inventory, and ending finished goods inventory. Enter a calculation for cost of goods available for sale. Finally, enter calculations for gross margin, operating costs, and operating income.

7. Verify the accuracy ofyour spreadsheet. Go to your schedule of cost of goods manufactured and change direct manufacturing labour from $30,000 to $42,000. If your spreadsheet is programmed correctly, cost of goods manufactured should change to $175,200, and operating income should change to $44,400.