Problem 1-3A (Continued)

Part 2

LEONE COMPANY
Income Statement
For Year Ended December 31, 2017
Sales.......................................................................			$4,462,500
Cost of goods sold
Finished goods inventory, December 31, 2016...		$ 167,350
Cost of goods manufactured...............................		1,935,650
Goods available for sale......................................		2,103,000
Less finished goods inventory, December 31, 2017.		136,490
Cost of goods sold...............................................			1,966,510
Gross profit from sales..........................................			2,495,990
Operating expenses
Selling expenses
Advertising expense..........................................		28,750
Depreciation expenseSelling equipment.......		8,600
Rent expenseSelling space............................		26,100
Sales salaries expense.......................................		392,560
Total selling expenses.......................................			456,010
General and administrative expenses
Depreciation expenseOffice equipment.........		7,250
Office salaries expense......................................		63,000
Rent expenseOffice space..............................		22,000
Total general and administrative expenses......			92,250
Total operating expenses....................................			548,260
Income before taxes			1,947,730
Income taxes expense...........................................			233,725
	Net income.............................................................			$1,714,005

Problem 1-3A

Part 1

LEONE COMPANY
Schedule of Cost of Goods Manufactured
For Year Ended December 31, 2017
Direct materials
Raw materials inventory, December 31, 2016....		$ 166,850
Raw materials purchases....................................		925,000
Raw materials available for use..........................		1,091,850
Less raw materials inventory, December 31, 2017		182,000
Direct materials used..........................................				$ 909,850
Direct labor.............................................................				675,480
Factory overhead
Depreciation expenseFactory equipment.......		33,550
Factory supervision............................................		102,600
Factory supplies used.........................................		7,350
Factory utilities....................................................		33,000
Indirect labor.......................................................		56,875
Miscellaneous production costs........................		8,425
Rent expenseFactory building........................		76,800
Maintenance expenseFactory equipment.......		35,400
Total factory overhead costs..............................				354,000
Total manufacturing costs.....................................				1,939,330
Work in process inventory, December 31, 2016...				15,700
Total cost of work in process................................				1,955,030
Less work in process inventory, December 31, 2017				19,380
	Cost of goods manufactured.................................				$1,935,650

QUESTION :Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory, and (b) days' sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (to compute turnover and days' sales in ventory for raw materials, use raw materials used rather than cost of goods sold). discuss some possible reasons for different between these ratios for the two types of inventories. round answers to one decimal place