PROBLEM 2-2. Cost of Goods Manufactured and Cost of Goods Sold [LO 3]

Terra Cotta Designs manufactures custom tiles. The following information relates to the fiscal year ending December 31, 2014:

Beginning balance in Raw Material Inventory - $450,000

Purchases of raw material - 1,500,000

Ending balance in Raw Material Inventory - 2000,000

Beginning balance in Work in Process Inventory - 650,000

Ending balance in Work in Process Inventory - 350,000

Direct labor cost - 2,500,000

Manufacturing overhead applied - 650,000

Beginning balance in Finished Goods Inventory - 750,000

Ending balance in Finished Goods Inventory - 350,000

Sales - 7,000,000

Selling expenses - 500,000

General and administrative expenses - 850,000

Required (a) Prepare a schedule of cost of goods manufactured. Assume that there are no indirect material costs. (b) Prepare an income statement for fiscal 2014. Ignore income taxes