Earlier in the year Jamie Forster founded InShape Systems, a company dedicated to providing a quality product to discerning consumers. She has worked hard over the past few months to get the company up and running. With the opening day of March 1^st fast approaching she has engaged you to provide some analysis on what she should price her product at on opening day.

Overview of Opening Balances in Manufacturing Inventory Accounts

As of March 1^st InShape Systems will carry the following manufacturing inventory:

Inventory Account	Balance
Direct Materials	$30,000
Indirect Materials	$20,000
Work-in-Progress	$41,000
Finished Goods	$27,000

Overview of Operating Expenses and Budgets

During the first month of business InShape expects the following expenses; $98,000 in production wages and $9,500 in supervisory salaries, utilities expenses of $13,750, $5,000 in prepaid expenses and $11,200 in depreciation expense on property, plant and equipment. Finally, selling, general and administrative expenses, totaling $60,000 are estimated for the month of March. 13750 + 11,200

Jamie expects that the business will purchase an additional $135,000 in direct materials in March, and that as production ramps up, $129,000 in direct materials and $12,000 in indirect materials, will be used up in March.

During March, it is expected that a total of $297,750 in product will be completed, and that $125,000 in goods will be sold (this figure is before any profit margin is added on to total cost).

After discussing strategy and finance at length with your consulting team, Jamie has decided on a budget of $1.20 million in direct labour costs, and $750,000 in total manufacturing overhead for her first year of business.

Jamie would like your advice and analysis on the following:

1. Develop a full-costing of the first month in sales using t-accounts, and the cost-accounting methods we reviewed in class.
   1. Develop a statement of cost of goods manufactured using the table formatted below. Look at example 1 as well to help you make the table
   2. Given the information above, what will be InShapes cost of goods manufactured and sold for the month of March?

EXAMPLE 1

Direct Materials Indirect Materials Direct Labour BI BI Applied MOH (D) incurred $ A $ A A applied Statement of Cost of Goods Manufactured Materials: Beg. Materials Inventory $ Purchases $ Materials Available $ Less: Ending Inventory $ Materials Used $ $ $ $ Purchases MOH Cntrl COGS $ WIP $ Indirect Labour $ Over Applied MOH El $ $ $ Applied MOH A Direct Labour Direct Manufacturing Overhead A Other Indirect Costs $ $ Under (Over) Applied Manfacturing Overhead A WIP Finished Goods A MOH Control (ID) IDM $ IDL $ Other ID $ $ $ $ BI $ $ DM $ DL $ $ Appld MOH BIS $ WIP A Add: Beg. Inventory Work-in-Process Total Manufacturing Costs Less: Ending Inventory Work-in-Progress Cost of Goods Manufactured A $ A 4 A A A COGMS COGMS A FG Applied MOH A A A A SGA Expense $ $ Income Statement Sales Cost of Goods Sold: Beginning Inventory Finished Goods Add: Cost of Goods Manufactured Cost of Goods Available for Sale Less: Ending Inventory Finished Goods Cost of Goods Manufactured & Sold Gross Profit Selling, General and Administrative Expenses Net Operating Profit Other ID Cost Detail Heat Maintenance Depreciation A $ A A A $ A A Budgeted Direct MOH Budgeted Direct Labour POMOH Rate American Domestic Goods Direct Labour 125,000 $ 125,000 Direct Materials 100,000 100,000 150,000 250,000 $ 150,000 WIP BI $ $ BI $ $ Purchases $ $ Indirect Materials 50,000 50,000 $ 25,000 MOH Cntri 25,000 $ $ Applied MOH (D) incurred $ 81,000 $ 83,333 applied $ 81,000 $ 83,333 $ 2,333 COGS Statement of Cost of Goods Manufactured Materials: Beg. Materials Inventory $ 100,000 Purchases $ 150,000 Materials Available $ 250,000 Less: Ending Inventory $ 100,000 Materials Used $ 150,000 $ Indirect Labour $ $ 25,000 $ 25,000 Over Applied MOH El $ 100,000 Applied MOH 83,333 S 83,333 $ $ Other Indirect Costs 31,000 $ 31.000 Direct Labour Direct Manufacturing Overhead Indirect Manufacturing Overhead Under (Over) Applied Manfacturing Overhead $ $ Finished Goods MOH Control (ID) IDM $ 25,000 IDL $ 25,000 Other ID $ 31,000 $ 81,000 $ 81,000 $ $ 125,000 $ 83,333 $ 81,000 $ (2,333) $ 437,000 $ 30,000 $ 467,000 $ 75,000 $ 392,000 BI $ $ WIPS 394,333 WIP 30,000 30,000 150,000 125,000 83,333 81,000 469,333 $ BI $ $ S DMS DL $ Appld MOH $ ID MOH $ $ Add: Beg. Inventory Work-in-Process Total Manufacturing Costs Less: Ending Inventory Work-in-Progress Cost of Goods Manufactured 314,333 COGMS $ El $ 394,333 $ 80,000 COGMS FG $ 314,333 Applied MOH $ $ 312,000 394,33 2,333 $ 620,000 El $ 75,000 $ SGA Expense 100,000 $ 100,000 $ $ Income Statement Sales Cost of Goods Sold: Beginning Inventory Finished Goods Add: Cost of Goods Manufactured Cost of Goods Available for Sale Less: Ending Inventory Finished Goods Cost of Goods Manufactured & Sold Gross Profit Selling, General and Administrative Expenses Net Operating Profit $ 392,000 $ 392,000 Other ID Cost Detail Heat $ $ 8,000 Maintenance $ 5,000 Depreciation $ 18,000 $ 31,000 $ 80,000 50% $ 312,000 $ 308,000 $ 100,000 $ 208,000 34% Budgeted Direct MOH Budgeted Direct Labour PDMOH Rate $ $ 1,200,000 1,800,000 66.67%