Chapter 2 Financial Statements, Sales
for Planning and Control
Exercises
Ex-1
Manuel Company
Determination of Ending Inventory of Finished Goods
$
Cost of Goods Manufactured 1,900,000
Add: Beginning Finished Goods Inventory 300,000
Cost of goods available for sales 2,200,000
Less: Ending Finished Goods Inventory 600,000
Cost of Goods Sold (W-1) 1,600,000
W-1 Cost of Goods sold:
$
Sales 2,000,000
Less: Gross Profit (2,000,000 x 20%) 400,000
Cost of Goods Sold 1,600,000
Ex-2
(1)
Balkwell Company
Cost of goods manufacturing statement
$ $
Beginning Inventory of raw materials 176,000
Add: Material Purchases 2,400,000
Add: Transportation In 32,000 2,432,000
Materials available for use 2,628,000
Less: Ending inventory of raw materials 196,000
Material Used 2,412,000
Add: Direct Materials 3,204,000
Prime Cost 5,616,000
Add: Factory overhead 1,885,600
Cost of goods manufacturing 7,501,600
,(2)
Balkwell Company
Cost of goods manufactured statement
$
Cost of Goods Manufacturing 7,501,600
Add: Beginning Work in process Inventory 129,800
Total cost put into process 7,631,400
Less: Ending Work in process inventory 136,800
Cost of goods manufactured 7,494,600
(3)
Balkwell Company
Cost of goods sold statement
$
Cost of Goods Manufactured 7,494,600
Add: Beginning Finished Goods Inventory 620,000
Cost of goods available for sales 8,114,600
Less: Ending Finished Goods Inventory 467,400
Cost of Goods Sold 7,647,200
Ex-3 (1)
Ruthven Company
Cost of goods sold statement
$
Beginning inventory of raw materials 8,000
Add: purchases 36,000
Material available for use 44,000
Less: Ending inventory of raw materials 8,500
Material used 35,500
Add: Direct labour 15,000
Prime cost 50,500
Add: Factory overhead 10,000
Cost of goods manufacturing 60,500
Add: Beginning work in process inventory 8,000
Total cost put into process 68,500
Less: Ending work in process inventory 15,000
Cost of goods manufactured 53,500
Add: Beginning Finished goods inventory 7,000
Cost of goods available for sales 60,500
Less: Ending Finished goods inventory 10,200
Cost of goods sold 50,300
,(2)
Ruthven Company
Income statement
$ $
Sales 72,000
Less: Cost of goods sold 50,300
Gross profit 21,700
Less: Operating expenses
Marketing expenses 3,600
Administrative expenses 720 4,320
Net operating income 17,380
Less: Other expenses 360
Net Income 17,020
Ex-4 (1)
Crowley Inc.,
Cost of goods sold statement
$
Beginning inventory of raw materials 7,000
Add: purchases 42,300
Material available for use 49,300
Less: Ending inventory of raw materials 7,400
Material used 41,900
Add: Direct labour 30,000
Prime cost 71,900
Add: Factory overhead 45,000
Cost of goods manufacturing 116,900
Add: Beginning work in process inventory 9,600
Total cost put into process 126,500
Less: Ending work in process inventory 13,000
Cost of goods manufactured 113,500
Add: Beginning Finished goods inventory 15,000
Cost of goods available for sales 128,500
Less: Ending Finished goods inventory 17,500
Cost of goods sold 111,000
,(2)
Crowley Inc.,
Income statement
$ $
Sales 182,000
Less: Cost of goods sold 111,000
Gross profit 71,000
Less: Operating expenses
Marketing expenses 14,100
Administrative expenses 22,900 37,000
Net Income 34,000
Ex-5 (1)
The Shelikoff Company
Income Statement
For the year ended December 31, 19--.
$ $
Sales 314,000
Less: Cost of goods sold:
Beginning Inventory of Raw Materials 3,800
Add: Purchases 140,000
Materials available for use 143,800
Less: Ending Inventory of Raw Materials 4,300
Material Used 139,500
Add: Direct Labour 67,350
Prime Cost 206,850
Add: Factory Overhead (50% of Direct Labour) 33,675
Cost of goods Manufacturing 240,525
Add: Beginning Work in process Inventory 4,600
Total cost put into process 245,125
Less: Ending Work in process Inventory 6,200
Cost of goods Manufactured 238,925
Add: Beginning Finished Goods Inventory 5,900
Cost of goods available for sales 244,825
Less: Ending Finished Goods Inventory 9,270 235,555
Cost of goods sold 78,445
Gross Profit
Less: Operating expenses
Marketing Expenses 23,115
Administrative expenses 17,650 40,765
Net Income 37,680
,(2)
Percentage of Net Income to Sales = Net Income / Sales x 100
= 37,,000 x 100
= 12% of Sales
Ex-6
Metaxen Corporation,
Cost of goods sold statement
$
Beginning inventory of raw materials 88,000
Add: purchases 366,000
Add: Freight on materials purchased 6,600
Material available for use 460,600
Less: Ending inventory of raw materials 64,000
Material used 396,600
Add: Direct labour 523,600
Prime cost 920,200
Add: Factory overhead (excluding depreciation) 468,400
Add: Depreciation (W-1) 104,400
Cost of goods manufacturing 1,493,000
Add: Beginning work in process inventory 29,800
Total cost put into process 1,522,800
Less: Ending work in process inventory 38,800
Cost of goods manufactured 1,484,000
Add: Beginning Finished goods inventory 44,200
Cost of goods available for sales 1,528,200
Less: Ending Finished goods inventory 66,000
Cost of goods sold 1,462,200
W-1 Depreciation Charged to Cost of Goods Sold:
Total Depreciation = $ 116,000
Depreciation charged to Cost of goods sold = $116,000 x 90% = $ 104,400
,Ex-7
Brockway Corporation,
Cost of goods sold statement
$
Beginning inventory of raw materials 90,000
Add: purchases 198,000
Material available for use 288,000
Less: Ending inventory of raw materials 95,000
Material used 193,000
Add: Direct labour 224,000
Prime cost 417,000
Add: Factory overhead 167,000
Cost of goods manufacturing 584,000
Add: Beginning work in process inventory 70,000
Total cost put into process 654,000
Less: Ending work in process inventory 80,000
Cost of goods manufactured 574,000
Add: Beginning Finished goods inventory 110,000
Cost of goods available for sales 684,000
Less: Ending Finished goods inventory 95,000
Cost of goods sold 589,000
Ex-8 (1)
Reinecke Inc.,
Cost of goods sold statement
$
Material used 440,000
Add: Direct labour 290,000
Prime cost 730,000
Add: Factory overhead (W-1) 89,760
Cost of goods manufacturing 819,760
Add: Beginning work in process inventory 41,200
Total cost put into process 860,960
Less: Ending work in process inventory 42,500
Cost of goods manufactured 818,460
Add: Beginning Finished goods inventory 34,300
Cost of goods available for sales 852,760
Less: Ending Finished goods inventory 31,500
Cost of goods sold 821,260
,W-1 Factory Overhead:
$
Indirect labour 46,000
Light & power 4,260
Depreciation 4,700
Repairs to machinery 5,800
Miscellaneous factory overhead 29,000
Factory Overhead: 89,760
(2)
Unit cost of goods manufactured = Cost of goods manufactured/ Units produced
= $ 818,,000
= $ 45.47 per unit
(3)
$
Applied Factory overhead (30% of $ 290,000) 87,000
Actual Factory overhead 89,760
Under applied factory overhead 2,760
Ex-9 (1)
Unit cost of finished goods inventory, December 31
= Cost of goods manufactured (W-1)/ Units produced during the year (W-2)
= $ 706,,000
= $ 176.65 per unit
W-1
White Corporation,
Cost of goods sold statement
$
Beginning inventory of raw materials 34,200
Add: purchases (W-1.1) 367,400
Material available for use 401,600
Less: Ending inventory of raw materials 49,300
Material used 352,300
Add: Direct labour 162,500
Prime cost 514,800
Add: Factory overhead (W-1.2) 152,650
Cost of goods manufacturing 667,450
Add: Beginning work in process inventory 81,500
Total cost put into process 748,950
Less: Ending work in process inventory 42,350
Cost of goods manufactured 706,600
,W 1.1 Purchases:
$
Purchases 364,000
Add: Freight in 8,600
Less: Purchases Discounts 5,200
Net Purchases including direct expenses 367,400
W 1.2 Factory overhead:
$
Indirect labour 83,400
Depreciation- Factory equipment 21,350
Miscellaneous factory overhead 47,900
Factory overhead 152,650
W-2 No. of Units Manufactured
Units
Ending finished goods 420
Add: units sold 3,880
4,300
Less: Beginning finished goods 300
Number of units manufactured 4,000
(2)
Total cost of finished goods inventory
= Units in finished goods inventory x unit cost of units manufactured
= 420 x $ 176.65
= $ 74,193
(3)
White Corporation,
Cost of goods sold statement
$
Cost of goods manufactured 706,600
Add: Beginning Finished goods inventory 48,600
Cost of goods available for sales 755,200
Less: Ending Finished goods inventory 74,193
Cost of goods sold 681,007
,(4)
White Corporation,
Income statement
$
Sales (3,880 units x $ 220 per unit) 853,600
Less: Cost of goods sold 681,007
Gross Profit 172,593
Unit Gross Profit = Gross Profit / Units sold
= $ 172,,880
= $ 44.48
Ex-10
Rate of return on capital employed
= Net income / capital employed x 100
= $ 40,000 / $ 400,000 x 100
= 10%
Ex-11
$ $
Sales (W-1) 12,000,000
Less: Cost of goods sold (balancing figure) 7,200,000
Gross Profit (40% of Sales) 4,800,000
Less: Operating expenses:
Selling & marketing expenses (15% of sales) 1,800,000
Administrative expenses (balancing figure) 1,762,500 3,562,500
Net operating income 1,237,500
Less: financial expenses (W-2) 37,500
Net income before tax 1,200,000
W-1 Sales:
Pretax income to sales = 10% of sales
Pretax income in $ = 1,200,000
Hence, 10% of sales = $ 1,200,000
Sales = $ 1,200,000/ 0.10
= $ 12,000,000
W-2 Financial expenses
Total Liabilities = $ 2,000,000
Bonds Payable = 37.5% of 2,000,000
= $ 750,000
Interest Expense = $ 750,000 x 5% = $ 37,500
, Ex-12 (1)
Yukon Refrigerator Company
Income Statement
For the year ended March 31, 19--.
$ $
Sales 6,634,000
Less: Cost of goods sold:
268,000
Beginning Inventory of Raw Materials
1,946,700
Add: Purchases
Materials available for use 2,214,700
Less: Ending Inventory of Raw Materials 167,000
Material Used 2,047,700
Add: Direct Labour 2,125,800
Prime Cost 4,173,500
Add: Factory Overhead 764,000
Cost of goods Manufactured 4,937,500
Add: Beginning Finished Goods Inventory 43,000
Cost of goods available for sales 4,980,500
Less: Ending Finished Goods Inventory (200x395) 79,000 4,901,500
Cost of goods sold 1,732,500
Gross Profit
Less: Operating expenses
Marketing Expenses 516,000
Administrative expenses 461,000 977,000
Net Income 755,500
(2)
No. of Units Manufactured
Units
Ending finished goods 200
Add: units sold 12,400
12,600
Less: Beginning finished goods 100
Number of units manufactured 12,500
(3)
Unit cost of finished goods inventory
= Cost of goods manufactured / Units produced during the year
= $ 4,937,,500
= $ 395 per unit
