ALABAMA CORPORATION

Goals and Objectives

Review of basic terminology

Review basic accounting and journal entries to reflect the flow of costs

Review preparation of income statement and supporting schedules for manufacturer given end-of-year information

The company manufactures a single product, cleverly named Product X.The following information is available for the calendar year 2018 just completed, during which they produced and sold 200,000 units.Sales for the year was $2,400,000.During the year, the company paid a sales commission of 5 percent of sales.The corporate income tax rate was 20%.

Direct materials purchases

$300,000

Direct labor

140,000

Depreciation - factory equipment

45,000

Depreciation - factory building

30,000

Depreciation - headquarters building

50,000

Factory insurance

15,000

Property taxes:

Factory

20,000

Headquarters

18,000

Utilities - factory

34,000

Utilities - sales

1,800

Administrative salaries

150,000

Indirect labor salaries

156,000

Sales office salaries

90,000

Inventory Information

12/31/2017

12/31/2018

Raw materials

$124,000

$152,000

Work in process

124,000

130,000

Finished Goods

109,000

118,904

please i need the answer for these questions

Cost Accounting 307

1.How many finished units of Product X do you thing were in the ending FG inventory?

2.As part of the annual audit you notice that "Indirect labor salaries" included the $20,000 salary paid to Ken, who actually works in the advertising department of the company.

a)Does this seem reasonable? Why or why not?

b)Does this make a difference in terms of the net operating income?Why or why not?

c)What incentive would management have to include the advertising costs as "indirect labor"? (That is, what would their motivation be to do this?)