QUESTION 1:

Problem No 1

SHOW YOUR CALCULATION

a) The following information is available for the Grant Company:

Freight in	$20,000	Purchase Return and allowance	$80,000
Marketing expenses	$200,000	Finished goods ending inventory	$90,000

The cost of goods sold is equal to 700% of marketing expenses.(

Calculate the cost of goods available for sale. ($1,490,000)

b) CGAS for the green and gold sporting goods store were $400,000, Gross Profit was 25% of sales, sales were $480,000.

Calculate the amount of the ending inventory. ($40,000)

c) Information concerning 19A projections of the Elston Company is

Net sales = $1,000,000, Fixed CGS of $100,000,60% increase in variable cost of

goods sold for each dollar increase in net sales.

Calculte the projected 19A CGS ($700,000)

d) Linda Company is preparing a pro forma schedule of CGM and has made the

following estimates:

Work in process inventory Jan 1	$40,400
Work in process inventory Dec 31	34,000
Direct material inventory Jan 1	52,200
Direct material inventory Dec 31	54,300
Purchase of Direct Material	445,000
Direct Labor	247,500
Factory overhead	565,000

How much is the cost of goods manufactured?($1,261,800)

e) . You have the following data:

Cost of goods sold	$70
Direct Labor	20
Direct Materials	15
Cost of goods manufactured	80
Work in process ending	10
Finished goods ending	15
Manufacturing overhead	30

Calculate the beginning work-in-process inventory? ($ 25)

f) The Davis Corp had the following information available for the year ended 2007.

	Beginning	Ending
Work in process inventory	$10,000	$15,000
Finished Goods inventory	21,000	17,000
Direct material Inventory	5,000	8,000
Direct Material Purchased		40,000
Direct Labor		2,500 DLH @ $8
Overhead		33,000

Calculate Cost of goods sold ($89,000)

Problem No 2 (Swift Company)

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 income statement follows.

Sales		$450,000
Less Operating expenses:
Direct labor cost	$70,000
Raw material purchased	165,000
Manufacturing overhead	85,000
Selling and administrative expenses	142,000	462,000
Net Operating loss		$(12,000)

After seeing the $12,000 loss for August, Swifts president stated. I was sure wed be profitable within six months, but our six months are up and this loss for August is even worse than Julys. I think it is time to start looking for someone to buy out the companys assets if we dont, within a few months there wont be any assets to sell. By the way, I dont see any reason to look for a new controller. We will just limp along with Sam for the time being.

The companys controller resigned a month ago. Sam a new assistant in the controllers office, prepared the income statement above. Sam has had little experience in manufacturing operations.

Inventory balances at the beginning end of August were.

	August 1	August 31
Raw material	$8,000	$13,000
Work in process	16,000	21,000
Finished goods	40,000	60,000

Required:

The president has asked you to check over the income statement and make recommendation as to whether the company should look for a buyer for its assets. Support your answer with a schedule of CGM and a new income statement.