Question

Cost Assignment Methods

Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water are mixed together and then bottled in 10-gallon drums. Brody provided the following information for last year:

Raw materials purchases	$280,000
Direct labor	140,000
Depreciation on factory equipment	45,000
Depreciation on factory building	30,000
Depreciation on headquarters building	45,000
Factory insurance	15,000
Property taxes:
Factory	20,000
Headquarters	18,000
Utilities for factory	34,000
Utilities for sales office	1,800
Administrative salaries	150,000
Indirect labor salaries	159,000
Sales office salaries	90,000
Beginning balance, raw materials	127,000
Beginning balance, work in process	124,000
Beginning balance, finished goods	84,000
Ending balance, raw materials	102,000
Ending balance, work in process	130,000
Ending balance, finished goods	79,000

Last year, Brody completed 100,000 units. Sales revenue equaled $1,200,000, and Brody paid a sales commission of 5 percent of sales.

Required:

6. Prepare an income statement for last year. Show the percentage of sales that each line item represents. When required, round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35.

Answer 1

Income statement for last year
Revenue & Gains		%on sales
Sales revenues	1200000
Expenses and losses
Cost of goods sold (see Note 1)	762000	63.50%
Depriciation on head quarters building	45000	3.75%
Property tax, Headquarters	18000	1.50%
Utilities for sales office	1800	0.15%
administrative salaries	150000	12.50%
sales office salaries	90000	7.50%
commission 5% on sales (5%*1200000)	60000	5.00%
Total Expenses and losses	1126800	93.90%
Net Income	73200	6.10%

Note 1 - Calculation of Cost of goods sold (COGS) -

	Particulars	Amt.
a	beginning balance Raw material	127000
b	Purchases	280000
c	Ending balance, Raw material	102000
d	Consumption of raw material (a+b-c)	305000
e	Direct labor	140000
f	Depriciation of factory equipment	45000
g	Depriciation of factory building	45000
h	factory insurance	15000
i	property taxes, factory	20000
j	utilities for factory	34000
k	Indirect labor salaries	159000
l	Factory cost (d+e+f+g+h+i+j+k)	763000
m	Beginning balances, WIP	124000
n	Ending balance, WIP	-130000
o	Cost of production (l+m-n)	757000
p	Beginning balances, FG	84000
q	Ending balance, FG	-79000
r	Cost of goods sold (o+p-q)	762000

Please check with your answer and let me know.