Management Accounting

EXERCISE 2-11 Preparing a Schedule of Costs of Goods Manufactured and Cost of Goods Sold [LO2, L04, L05] The following cost and inventory data are taken from the accounting records of Mason Company for the year just completed: Costs incurred: Direct labor cost Purchases of raw materials Manufacturing overhead Advertising expense.. Sales salaries.. Depreciation office equipment $70,000 $118,000 $80,000 $90,000 $50,000 $3,000 Beginning of the Year End of the Year Inventories: Raw materials Work in process Finished goods. $7,000 $10,000 $20,000 $15,000 $5,000 $35,000 Required: 1. Prepare a schedule of cost of goods manufactured. 2. Prepare the cost of goods sold section of Mason Company's income statement for the year EXERCISE 2-12 Product Cost Flows; Product versus Period Costs [LO3, L04] The Devon Motor Company produces motorcycles. During April, the company purchased 8,000 batteries at a cost of $10 per battery. Devon withdrew 7,600 batteries from the storeroom during the month of these, 100 were used to replace batteries in motorcycles used by the company's traveling sales staff. The remaining 7,500 batteries withdrawn from the storeroom were placed in motorcycles being produced by the company. Of the motorcycles in production during April, 90% were completed and transferred from work in process to finished goods. Of the motorcycles com- pleted during the month, 30% were unsold at April 30. There were no inventories of any type on April 1. Required: 1. Determine the cost of batteries that would appear in each of the following accounts at April 30: Raw Materials. b. Work in Process. Finished Goods. d. Cost of Goods Sold Selling Expense. . 2. Specify whether each of the above accounts would appear on the balance sheet or on the in- come statement at April 30. excel PROBLEM 2-16 Schedule of Cost of Goods Manufactured; Income Statement LO2, LO3, L04, L05] Swift Company was organized on March 1 of the current year. After five months of start-up losses, management had expected to earn a profit during August. Management was disappointed. however, when the income statement for August also showed a loss. August's income statement follows: Swift Company Income Statement For the Month Ended August 31 $450,000 Sales Less operating expenses Direct labor cost Raw materials purchased Manufacturing overhead Selling and administrative expenses Net operating loss $ 70,000 165,000 85.000 142,000 462,000 $(12.000) After seeing the $12,000 loss for August, Swift's president stated, "I was sure we'd be profitable within six months, but our six months are up and this loss for August is even worse than July's. I think it's time to start looking for someone to buy out the company's assetsif we don't, within a few months there won't be any assets to sell. By the way, I don't see any reason to look for a new controller. We'll just limp along with Sam for the time being." The company's controller resigned a month ago. Sam, a new assistant in the controller's office, prepared the income statement above. Sam has had little experience in manufacturing operations Inventory balances at the beginning and end of August were: Raw materials Work in process Finished goods August 1 $8,000 $16,000 $40,000 August 31 $13,000 $21,000 $60,000 The president has asked you to check over the income statement and make a recommendation as to whether the company should look for a buyer for its assets. Required: 1. As one step in gathering data for a recommendation to the president, prepare a schedule of cost of goods manufactured for August 2. As a second step, prepare a new income statement for August. 3. Based on your statements prepared in (1) and (2) above, would you recommend that the com- pany look for a buyer