Chapter

Manufacturing Income Statement, Statement of Cost of Goods Manufactured

Several items are omitted from the income statement and cost of goods manufactured statement data for two different companies for the month of December 2014:

	Grant Company		McClellan Company
Materials inventory, December 1	$80,200		$102,660
Materials inventory, December 31	(a)		116,010
Materials purchased	203,710		230,990
Cost of direct materials used in production	214,940		(a)
Direct labor	302,350		(b)
Factory overhead	93,830		114,980
Total manufacturing costs incurred during December	(b)		664,210
Total manufacturing costs	765,100		911,620
Work in process inventory, December 1	153,980		247,410
Work in process inventory, December 31	129,920		(c)
Cost of goods manufactured	(c)		658,050
Finished goods inventory, December 1	135,540		114,980
Finished goods inventory, December 31	141,950		(d)
Sales	1,182,150		1,026,600
Cost of goods sold	(d)		664,210
Gross profit	(e)		(e)
Operating expenses	153,980		(f)
Net income	(f)		227,910

Required:

Hint(s)

1. Determine the amounts of the missing items, identifying them by letter. Enter all amounts as positive numbers.

Letter	Grant Company	McClellan Company
a.	$	$
b.	$	$
c.	$	$
d.	$	$
e.	$	$
f.	$	$

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1. a. The cost of direct materials used in production includes the beginning materials inventory plus purchases, less the ending materials inventory. b. Total manufacturing costs incurred during December include direct materials, direct labor, and factory overhead. c. The cost of goods manufactured is beginning work in process plus total manufacturing costs less the ending work in process. d. The cost of goods sold is the beginning finished goods plus the cost of goods manufactured, less the ending finished goods. e. Sales minus cost of goods sold equals gross profit. f. Gross profit minus operating expenses equals net income.

Use similar relationships from Grant to find the missing amounts for the McClellan items (a) through (f).

Learning Objective 2, Learning Objective 3.

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Solution

Hint(s)

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2. Prepare McClellan Company's statement of cost of goods manufactured for December. Enter all amounts as positive numbers.

McClellan Company
Statement of Cost of Goods Manufactured
For the Month Ended December 31, 2014
Indirect labor Machinery depreciation Supplies Work in process inventory, December 1, 2014 Correct 4 of Item 2						$ Correct 5 of Item 2
Direct materials:
Direct labor Factory overhead Work in process, December 31, 2014 Materials inventory, December 1, 2014 Correct 7 of Item 2		$ Correct 8 of Item 2
Factory overhead Operating expenses Purchases Sales Correct 9 of Item 2		Correct 10 of Item 2
Cost of materials available for use Cost of goods sold Cost of goods manufactured Cost of direct materials used in production Correct 11 of Item 2		$ Correct 12 of Item 2
Less indirect labor Less materials inventory, December 31, 2014 Less work in process inventory, December 1, 2014 Less work in process, December 31, 2014 Correct 13 of Item 2		Correct 14 of Item 2
Cost of materials available for use Cost of goods sold Cost of goods manufactured Cost of direct materials used in production Correct 15 of Item 2				$ Correct 16 of Item 2
Cost of goods sold Direct labor Indirect labor Work in process inventory, December 1, 2014 Correct 17 of Item 2				Correct 18 of Item 2
Cost of materials available for use Direct materials Factory overhead Purchases Correct 19 of Item 2				Correct 20 of Item 2
Total manufacturing costs incurred during December						Correct 22 of Item 2
Total manufacturing costs						$ Correct 24 of Item 2
Less cost of materials available for use Less direct materials Less materials inventory, December 31, 2014 Less work in process inventory, December 31, 2014 Correct 25 of Item 2						Correct 26 of Item 2
Cost of materials available for use Cost of goods sold Cost of goods manufactured Cost of direct materials used in production Correct 27 of Item 2						$ Correct 28 of Item 2

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2. The cost of goods manufactured is the beginning work in process plus the cost of direct materials used in production plus direct labor and factory overhead, less the ending work in process.

Learning Objective 2, Learning Objective 3.

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Solution

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3. Prepare McClellan Company's income statement for December.

McClellan Company
Income Statement
For the Month Ended December 31, 2014
Cost of goods sold Gross profit Indirect labor Sales Correct 4 of Item 3				$ Correct 5 of Item 3
Cost of goods sold:
Finished goods inventory, December 1, 2014 Finished goods inventory, December 31, 2014 Operating expenses Sales Correct 7 of Item 3		$ Correct 8 of Item 3
Cost of materials available for use Cost of goods sold Cost of goods manufactured Cost of direct materials used in production Correct 9 of Item 3		Correct 10 of Item 3
Cost of finished goods available for sale Cost of materials available for use Cost of goods manufactured Cost of direct materials used in production Correct 11 of Item 3		$ Correct 12 of Item 3
Less finished goods inventory, December 31, 2014 Less operating expenses Less finished goods inventory, December 1, 2014 Less sales Correct 13 of Item 3		Correct 14 of Item 3
Cost of materials available for use Cost of goods sold Cost of goods manufactured Cost of direct materials used in production Correct 15 of Item 3				Correct 16 of Item 3
Cost of goods sold Gross profit Operating expenses Sales Correct 17 of Item 3				$ Correct 18 of Item 3
Direct labor Factory overhead Finished goods inventory, December 1, 2014 Operating expenses Correct 19 of Item 3				Correct 20 of Item 3
Net income Net loss Correct 21 of Item 3				$