P4.38 LO 4.7 Schedules of cost of goods manufactured and sold; income statement: manufacturer The following data refer to Mercurial Manufacturing Pty Ltd for the current year: Sales revenue Raw material inventory, 1 January $1578750 66750 Purchases of raw material Raw material inventory, 31 December Direct labour cost incurred Selling and administrative expenses Indirect labour cost incurred Council rates Depreciation of factory building Income tax expense Indirect material used Depreciation of factory equipment Insurance on factory and equipment Electricity for factory Work in process inventory, 1 January Work in process inventory, 31 December Finished goods inventory, 1 January Finished goods inventory, 31 December Applied manufacturing overhead Required 548 250 44 250 355 500 201 750 112500 67 500 93 750 18 750 33 750 45 000 30000 52 500 0 30000 26 250 30000 433 125 1. Prepare Mercurial's schedule of cost of goods manufactured for the current year. 2. Prepare Mercurial's schedule of cost of goods sold. The company closes overapplied or underapplied overhead into cost of goods sold.

3. Prepare Mercurial's income statement. 4. Construct an Excel spreadsheet to solve all of the preceding requirements, and use it to answer the following:

(a) Suppose Mercurial had increased its production in the current year by 20 per cent. Would the direct material cost shown on the schedule of cost of goods manufactured have been higher or the same? Why?

(b) Answer the same question as in requirement 4

(a) for depreciation on the factory building.

(c) Suppose that only half of the $45000 depreciation on equipment was related to factory machinery, and the other half was related to selling and administrative equipment. How would this have changed the schedule of cost of goods manufactured?