This is Mascos income statement. It is similar to Exhibit 2-14 on page 35 of our text.

MASCO CORPORATION and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

for the years ended December 31, 2016, 2015 and 2014

	(In Millions, Except Per Common Share Data)
	2016				2015				2014
Net sales	$	7,357			$	7,142			$	7,006
Cost of sales	4,901				4,889				4,946
Gross profit	2,456				2,253				2,060
Selling, general and administrative expenses	1,403				1,339				1,347
Income from litigation settlements									(9		)
Impairment charge for other intangible assets									1
Operating profit	1,053				914				721
Other income (expense), net:
Interest expense	(229		)		(225		)		(225		)
Other, net	6								11
	(223		)		(225		)		(214		)
Income from continuing operations before income taxes	830				689				507
Income tax expense (benefit)	296				293				(361		)
Income from continuing operations	534				396				868
(Loss) income from discontinued operations, net					(2		)		35
Net income	534				394				903
Less: Net income attributable to non-controlling interest	43				39				47
Net income attributable to Masco Corporation	$	491			$	355			$	856

This is the inventory footnote from Mascos audited financial statement:

MASCO CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

D. INVENTORIES

	(In Millions) At December 31
	2016				2015
Finished goods	$	366			$	358
Raw material	254				238
Work in process	92				91
Total	$	712			$	687

Inventories, which include purchased parts, materials, direct labor and applied manufacturing overhead, are stated at the lower of cost or net realizable value, with cost determined by use of the first-in, first-out method.

Do this, please

1. The Masco inventory footnote lists the three classifications of inventory that we studied: Raw Materials, Work in Process and Finished Goods. It also lists the items that are included in those three inventories. Classify each item in the appropriate inventory account and include a brief explanation as to why you included the item there. I have completed A as an example. B, C and D are worth 5 points each.

A. Purchased parts. Purchased parts would be included in Finished Goods Inventory. Im assuming these parts are purchased from an outside supplier and then sold to customers. If they were parts to be used in production, they would have been classified as materials.

B. Materials

C. Direct Labor

D. Applied Manufacturing Overhead

2. The schedule below looks similar to Exhibit 2-13 on page 35 of our text. The computation is described at the bottom of page 34. Using the information from Mascos footnote for the inventory balances, and the income statement for the amount of cost of goods sold, compute the amount of Cost of goods manufactured. The balances for December 31, 2015 will be the beginning balances and the balances for December 31, 2016 will be the ending balances. (15 points)

Masco Corporation
Summary of Cost of Goods Sold
for the year ended December 31, 2016
Cost of goods manufactured
Add: Beginning finished goods inventory
Cost of goods available for sale
Less: Ending finished goods inventory
Cost of goods sold

3. The schedule below is similar to Exhibit 2-12 on page 34 of our text (starting with the first yellowed line). Using the cost of goods manufactured you computed in #2 and the inventory balances for work in process from Mascos footnote, compute Total manufacturing costs for the year. (15 points)

Masco Corporation
Schedule of Cost of Goods Manufactured
for the year ended December 31, 2016
Total manufacturing costs for the year
Add: Beginning work in process inventory
Total cost of work in process during the year
Less: Ending work in process inventory
Cost of goods manufactured

4. In Chapter 2 we learned about three types of businesses. Based upon what you have learned, is Masco a Service, Merchandising, or Manufacturing firm? Explain, using two complete sentences that make sense. (5 points)