Exercise 1-8A (Algo) Allocating product costs between ending inventory and cost of goods sold LO 1-3 Franklin Manufacturing Company began operations on January 1. During the year, it started and completed 1.760 units of product. The financial statements are prepared in accordance with GAAP. The company incurred the following costs: 1. Raw materials purchased and used-$3,150, 2 Wages of production workers-$3.610. 3. Salaries of administrative and sales personnel-$1.985. 4. Depreciation on manufacturing equipment-$6,088. 5. Depreciation on administrative equipment-$1.780. Franklin sold 1,170 units of product. Required a. Determine the total product cost for the year. b. Determine the total cost of the ending inventory. (Do not round intermediate calculations.) c. Determine the total of cost of goods sold. (Do not round intermediate calculations.) Answer is complete but not entirely correct. a 3 32 390 Total product cost Total cost of ending inventory Total cost of goods sold Problem 1-27A (Algo) Importance of cost classification LO 1-3, 1-6 Finch Manufacturing Company (CMC) was started when it acquired $92,000 by issuing common stock. During the first year of operations, the company incurred specifically identifiable product costs (materials, labor, and overhead) amounting to $59.800. CMC also incurred $87.400 of engineering design and planning costs. There was a debate regarding how the design and planning costs should be classified. Advocates of Option 1 believe that the costs should be classified as general, selling and administrative costs. Advocates of Option 2 believe it is more appropriate to classify the design and planning costs as product costs. During the year, CMC made 4,600 units of product and sold 3.700 units at a price of $37.00 each. All transactions were cash transactions. Required 0-1. Prepare an income statement and balance sheet under option 1. a-2. Prepare an income statement and balance sheet under option 2. b. Identify the option that results in financial statements that are more likely to leave a favorable impression on investors and creditors. C. Assume that CMC provides an incentive bonus to the company president equal to 13 percent of net income. Compute the amount of the bonus under each of the two options. Identify the option that provides the president with the higher bonus. d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two options. Identify the option that minimizes the amount of the company's income tax expense. Answer is not complete. Complete this question by entering your answer in the tabs below. Reg A2 Bal Reg A1 Inc Stmt Req A1 Bal Sheet Reg A2 Inc Stmt Reg D Sheet to search Answer is not complete. Complete this question by entering your answer in the tabs below. Reg A1 Inc Stmt Req A1 Bal Sheet Reg A2 IncReq A2 Bal Stmt Sheet Req B ReqC Reg D Prepare a GAAP-based income statement for Option 2. FINCH MANUFACTURING COMPANY Income Statement Sales revenue Cost of goods sold 136,900 112 748 X 24.152 24.152 HET TUUU UIL UPUIT dl provides me president d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each option that minimizes the amount of the company's income tax expense. X Answer is not complete. Complete this question by entering your answer in the tabs below. Reg A1 Inc Stmt Reg A1 Bal Sheet Req A2 IncReq A2 Bal Stmt Sheet Req B ReqC Reg D Assume that CMC provides an incentive bonus to the company president equal to 13 percent of net income amount of the bonus under each of the two options. Identify the option that provides the president with the (Round your answers to the nearest whole dollar.) Option no. 1 bonus Option no. 2 bonus The option that provides the president with the higher bonus $ 182 $ 3,140 X Option 2 COMally president equal to 13 percent of net in of the bonus under each of the two options. Identify the option that provides the president with the hi d. Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of th option that minimizes the amount of the company's income tax expense. & Answer is not complete. Complete this question by entering your answer in the tabs below. Req A1 Inc Stmt Req A1 Bal Sheet Req A2 Inc Stmt Req A2 Bal Sheet Req B ReqC Req D Assume a 35 percent income tax rate. Determine the amount of income tax expense under each of the two opti the option that minimizes the amount of the company's income tax expense. (Round your answers to the neare dollar.) Option no. 1 income tax expense Option no. 2 income tax expense S The option that minimizes the amount of the company's income tax expense $ 490 $ 8,453 Option 1