Question
LTC Company, a manufacturing firm, had the following inventory balances at the beginning and end of the current year. Inventory Account : Work-in-process inventory, 1
LTC Company, a manufacturing firm, had the following inventory balances at the beginning and end of the current year.
Inventory Account:
Work-in-process inventory, 1 January 2019 : $ 288,000
Work-in-process inventory, 31 December 2019: $ 286,000
Raw materials inventory, 1 January 2019 : $ 150,000
Raw materials inventory, 31 December 2019: $ 158,000
Finished goods inventory, 1 January 2019: $ 370,000
Finished goods inventory, 31 December 2019 : 388,000
During the year, the company purchased $620,000 of raw materials and spent $970,000 on direct labour. The actual machine hours incurred was 31,850 hours.
Manufacturing overhead costs were as followed:
Indirect Material: $ 26000
Indirect Labour : $ 64,000
Depreciation on Plant and Equipment : $ 250,000
Electricity : 66,000
Other : 76,000
LTC Company allocates manufacturing cost to work in process on the basis of machine hours. The budgeted manufacturing overhead for the year was $480,000 and the budgeted machine hours were 32,000 hours.
Sales revenue was $2,640,000 for the year. Sales and administrative expenses amounted to $274,000.
Required: Show ALL your workings and prepare
- (i)Schedule of Cost of Goods Manufactured for 2019
- (ii)Cost of Goods Sold Report, for 2019
- (iii)Income Statement for 2019
- (iv)Explain the differences between a prime and conversion cost.
- (v)Explain the difference between a product cost and a non-manufacturing cost.
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