Question

Selected account balances for the year ended December 31 are provided below for Superior Company:

Selling and administrative salaries	$	111,000
Insurance, factory		6,600
Utilities, factory		64,800
Purchases of raw materials		?
Indirect labour		64,000
Direct labour		75,600
Advertising expense		73,000
Cleaning supplies, factory		8,000
Sales commissions		39,000
Rent, factory building		115,000
Maintenance, factory		30,000

Inventory balances at the beginning and end of the year were as follows:

	Beginning of the Year			End of the Year
Raw materials	$	51,600		$	16,100
Work in process		?			36,300
Finished goods		43,000			76,000

The total manufacturing costs for the year were $704,000, and the cost of goods sold totalled $670,000.

Required:
1.a. Prepare a schedule of cost of goods manufactured.

SUPERIOR COMPANY
Schedule of Cost of Goods Manufactured
For the Year Ended December 31
Direct materials:
Raw materials available for use	0
		$0
Manufacturing overhead:
Total overhead costs		0
Total manufacturing costs		0
Total work in process inventory		0
Cost of goods manufactured		$0

1.b. Prepare the cost of goods sold section of the company's income statement for the year.

SUPERIOR COMPANY
Income Statement (Partial)
For the Year Ended December 31
Goods available for sale	0
Cost of goods sold	$0

2. Assume that the dollar amounts given above are for the equivalent of 50,000 units produced during the year. Compute the average cost per unit for direct materials used and the average cost per unit for rent on the factory building. (Round your answers to 2 decimal places.)

	Average Cost
Direct materials		per unit
Rent on the factory building		per unit

3. Assume that in the following year the company expects to produce 71,875 units. What average cost per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (Assume that direct materials are a variable cost and that rent is a fixed cost.) (Round your "Average Cost'' answers to 2 decimal places.)

	Average Cost		Total Cost
Direct materials		per unit
Rent on the factory building		per unit

Answer 1

Statement of cost of goods manufactured

Direct materials
Beginning raw materials	$51,600
Add: Purchase of raw materials	$304,500
Raw materials available for use	$356,100
Less: Ending raw materials	($16,100)
Direct materials used		$340,000
Direct labor		$75,600
Manufacturing overhead:
Insurance factory	$6,600
Utilities factory	$64,800
Indirect labor	$64,000
Cleaning supplies, factory	$8,000
Rent factory building	$115,000
Maintanence factory	$30,000
Total manufacturing overhead		$288,400
Total manufacturing costs		$704,000
Add: Beginning Work-in-process		$35,300
Total cost of work in process		$739,300
Less: Ending Work-in-process		($36,300)
Cost of goods manufactured		$703,000

Income statement (partial)

Beginning finished goods	$43,000
Add: Cost of goods manufactured	$703,000
Cost of goods available for sale	$746,000
Less: Ending finished goods	($76,000)
Cost of goods sold	$670,000

2.

Average cost:

Direct materials =$6.8($340,000/50,000)

Rent on the factory building =$2.3($115,000/50,000)

3.

Direct materials =$6.8 total cost =$488,750

Rent on the factory building=$2.3 per total cost =$115,000

Material cost is variable, it will change with the change in units.

And Rent on the factory building is a fixed cost .