Cost Flow Relationships

The following information is available for the first year of operations of Creston Inc., a manufacturer of fabricating equipment:

Sales	$981,000
Gross profit	264,900
Indirect labor	88,300
Indirect materials	36,300
Other factory overhead	16,700
Materials purchased	500,300
Total manufacturing costs for the period	1,083,000
Materials inventory, end of period	36,300

Using the above information, determine the following amounts:

a. Cost of goods sold	$
b. Direct materials cost	$
c. Direct labor cost

Question 2

Financial Statements of a Manufacturing Firm

The following events took place for Rushmore Biking Inc. during February, the first month of operations as a producer of road bikes:

	Purchased $353,200 of materials.
	Used $303,800 of direct materials in production.
	Incurred $260,000 of direct labor wages.
	Applied factory overhead at a rate of 70% of direct labor cost.
	Transferred $716,000 of work in process to finished goods.
	Sold goods with a cost of $706,400.
	Revenues earned by selling bikes, $1,264,500.
	Incurred $303,800 of selling expenses.
	Incurred $113,000 of administrative expenses.

a. Prepare the income statement for Rushmore Biking Inc. for the month ending February 28. Assume that Rushmore Biking Inc. uses the perpetual inventory method.

Rushmore Biking Inc.
Income Statement
For the Month Ended February 28
Revenues		$
Cost of goods sold
Gross profit		$
Selling and administrative expenses:
Selling expenses	$
Administrative expenses
Total selling and administrative expenses
Operating income		$

b. Determine the inventory balances on February 28, the end of the first month of operations.

Materials inventory, February 28	$
Work in process inventory, February 28	$
Finished goods inventory, February 28	$