Question

Maryville, Inc., incurred the following costs during August:

Raw materials used	$	33,100
Direct labor		87,000
Manufacturing overhead, actual		41,900
Selling expenses		24,710
Administrative expenses		22,590
Interest expense		9,800

During the month, 6,000 units of product were manufactured and 4,500 units of product were sold. On August 1, Maryville, Inc., carried no inventories. On August 31, there were no inventories other than finished goods.

Required:

a. Calculate the cost of goods manufactured during August and the average cost per unit of product manufactured.

b. Calculate the cost of goods sold during August.

c-1. Calculate the difference between cost of goods manufactured and cost of goods sold.

c-2. How will this amount be reported in the financial statements?

	Finished goods inventory
	Work in progress inventory
	Raw materials inventory

d. Prepare a traditional (absorption) income statement for Maryville, Inc., for the month of August . Assume that sales for the month were $246,292 and the company's effective income tax rate was 35%.

Answer 1

a) Cost of goods manufactured = 33100+87000+41900 = 162000

Average cost per unit = 162000/6000 = 27 per unit

b) Cost of goods sold = 27*4500 = 121500

c-1) Difference between cost of goods manufactured and cost of goods sold = 162000-121500 = 40500

c-2) Amount to be reported

Finished good inventory = $40500

Work in process inventory = $0

Raw material inventory = $0

d) Traditional income statement

Sales	246292
Cost of goods sold	121500
Gross margin	124792
Selling and administrative expense	47300
Operating income	77492
Interest expense	9800
Income before tax	67692
Income tax	23692.20
Net income	43999.80