- A Company expects to maintain the same inventories at the end of the year as the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. The various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
| | Estimated FIXED COST | Estimated VARIABLE COST (PER UNIT SOLD) |
| Production costs: | | |
| Direct Materials | N/A | $45.00 |
| Direct Labor | N/A | 40.00 |
| Factory Overhead | $250,000 | 5.00 |
| Selling Expenses: | | |
| Sales salaries and commissions | 340,000 | 6.00 |
| Advertising | 106,000 | N/A |
| Travel | 6,000 | N/A |
| Miscellaneous selling expenses | 3,300 | 2.00 |
| Administrative expenses: | | |
| Office and officers salaries | 425,000 | N/A |
| Supplies | 9,000 | 5.00 |
| Miscellaneous administrative expenses | 6,700 | 2.00 |
10.) Several items are omitted from the income statement and cost of goods sold manufactured statement data for two different companies for the month of December: A Company $ 75,800 (a) 292,800 327,800 B Company $ 175,300 81,140 (a) (b) 397,800 158,400 (b) 567,220 246,060 1,509,000 Materials inventory Dec 1 Materials inventory Dec 31 Materials Purchased Cost of direct materials used in production Direct labor Factory Overhead Total Manufacturing costs incurred in December Total manufacturing costs Work in process inventory Dec 1 Work in process inventory Dec 31 Cost of goods manufactured Finished goods inventory Dec 983,000 129,000 1,717,320 198,320 182,200 (c) (c) 1,522,020 259,0808 234,000 Finished goods inventory Dec 207,400 (d) 31 Sales Cost of goods sold Gross profit Operating expenses Net Income l 1.137.000 (d) e) 127,600 (1) 1.934,320 1,534,040 (e) (0) 154,920 Instructions: 1. For both companies, determine the amounts of the missing items (a) through (O), identify them by letter 2. Prepare statement of goods manufactured for December for company A 3. Prepare incomes statements for December for company A 1. Company A 0.839 boo 4.53,000 Company B a GO1,500 b.695.700 c. 393,6a d. 2,578, 783 1.245,360 400, A Company Statement of Cost of Goods Manufactured For the Month Ended Dec 31 Work in process inventory, Dec 1 Direct materials: Materials inventory, Dec 1 Purchases Cost of materials available for use Materials inventory, Dec 31 Cost of direct materials used Direct labor Factory overhead Total manufacturing costs incurred in Dec Total manufacturing costs Work in process inventory, Dec 31 Cost of goods manufactured B Company Income Statement For the Month Ended Dec 31 Sales Cost of goods sold: Finished goods inventory, Dec 1 Cost of goods manufactured Cost of finished goods available for sale Finished goods inventory, Dec 31 Cost of goods sold Gross profit Operating expenses Net income 11.) A Company expects to maintain the same inventories at the end of the year as the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. The various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: Estimated FIXED COST Estimated VARIABLE COST (PER UNIT SOLD) N/A N/A $250,000 $45.00 40.00 5.00 340,000 6.00 N/A Production costs: Direct Materials Direct Labor Factory Overhead Selling Expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expenses 106,000 6,000 3,300 N/A 2.00 425,000 9,000 6,700 N/A 5.00 2.00 Total 1,146,000 $105.00 It is expected that 15,000 units will be sold at a price of $260 a unit. Maximum sales within relevant range are 20,000 units. Instructions: 1. Prepare an estimated income statement 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars 4. What is the expected margin of safety in dollars and as a percentage of sales? Round to one decimal place 5. Determine the operating leverage A Company Estimated Income Statement For the Year Ended December 31 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Total cost of goods sold Gross profit Expenses: Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Operating income
