Question

The following events took place for Digital Vibe Manufacturing Company during March, the first month of its operations as a producer of digital video monitors:

	a. Purchased $138,800 of materials.
	b. Used $94,780 of direct materials in production.
	c. Incurred $181,280 of direct labor wages.
	d. Incurred $213,200 of factory overhead.
	e. Transferred $428,060 of work in process to finished goods.
	f. Sold goods for $654,000.
	g. Sold goods with a cost of $360,750.
	h. Incurred $85,320 of selling expense.
	i. Incurred $70,650 of administrative expense.

Required:

Using the information given, complete the following:

	a. Prepare the March income statement for Digital Vibe Manufacturing Company. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
	b. Determine the inventory balances at the end of the first month of operations.

Answer 1

a)	INCOME STATEMENT
	Sales		654000
	Cost of goods sold		360750
	Gross profit		293250
	Operating expenses:
	Selling expense	85320
	Admistrative expense	70650
	Total operating expenses		155970
	Net operating income		137280
b)	INVENTORY BALANCES:
	Raw materials inventory = 138800-94780 =	44020
	WIP inventory = 94780+181280+213200-428060 =	61200
	Finished goods inventory = 428060-360750 =	67310
	Total inventory	172530