| Book Edition | 4th Edition |
| Author(s) | Hansen, Mowen |
| ISBN | 9781305970663 |
| Publisher | Cengage |
| Subject | Management |
Types of Costs, Cost of Goods Manufactured, Absorption-Costing Income Statement
Palmer Manufacturing produces weather vanes. For the year just ended, Palmer produced 10,000 weather vanes with the following total costs:
| Direct materials | $20,000 |
| Direct labor | 35,000 |
| Overhead | 10,000 |
| Selling expenses | 6,250 |
| Administrative expenses | 14,400 |
During the year, Palmer sold 9,800 units for $12 each. Beginning finished goods inventory consisted of 630 units with a total cost of $4,095. There were no beginning or ending inventories of work in process.
Required:
Calculate the unit costs for the following: direct materials, direct labor, overhead, prime cost, and conversion cost.
Types of Costs, Cost of Goods Manufactured, Absorption-Costing Income Statement
Palmer Manufacturing produces weather vanes. For the year just ended, Palmer produced 10,000 weather vanes with the following total costs:
| Direct materials | $20,000 |
| Direct labor | 35,000 |
| Overhead | 10,000 |
| Selling expenses | 6,250 |
| Administrative expenses | 14,400 |
During the year, Palmer sold 9,800 units for $12 each. Beginning finished goods inventory consisted of 630 units with a total cost of $4,095. There were no beginning or ending inventories of work in process.
Required:
Prepare schedules for cost of goods manufactured and cost of goods sold.
Types of Costs, Cost of Goods Manufactured, Absorption-Costing Income Statement
Palmer Manufacturing produces weather vanes. For the year just ended, Palmer produced 10,000 weather vanes with the following total costs:
| Direct materials | $20,000 |
| Direct labor | 35,000 |
| Overhead | 10,000 |
| Selling expenses | 6,250 |
| Administrative expenses | 14,400 |
During the year, Palmer sold 9,800 units for $12 each. Beginning finished goods inventory consisted of 630 units with a total cost of $4,095. There were no beginning or ending inventories of work in process.
Required:
Prepare an absorption-costing income statement for Palmer Manufacturing.
I attach a file for a better formatting.
If you have question regarding the explanation just comment.
| Direct materials used | $20,000 |
| Direct labor | $35,000 |
| Overhead | $10,000 |
| Total Manufacturing Cost | $65,000 |
Add: Work in Process, beginning | 0 |
Less: Work in Process, ending | (0) |
|
|
| Cost of Goods Manufactured | $65,000 |
Add: Finished Goods, beginning | $4,095 |
Less: Finished Goods, ending 9,800-630 = 9,170 (10,000-9,170) x ($65,000÷10,000) = 830 x $6.5
| ($5,395) |
| Cost of Goods Sold | $63,700 |
Note:
Since there were no Work in Process at the beginning and ending of the year, the total manufacturing cost is the same as the cost of goods manufactured.
Finished goods ending is calculated by first deducting the beginning finished goods from the total units sold during the period. It is because unsold unit at the prior year are expected to be sold in the following year.
Kindly refer to the explanation section for the complete answer.
The schedule of cost of goods manufactured and cost of goods sold are shown on the table. Below the table are some notes regarding the amounts presented on the table.
Palmer Manufacturing.
Income Statement
For the Year Ended December 31, 2017
Sales $117,600
Cost of goods sold:
Beginning finished goods inventory $4,095
Add: Cost of goods manufactured $59,095
$63,190
Deduct: Ending finished goods inventory
Gross margin $54,410
Operating expenses:
Selling expenses $6,250
Administrative expenses $14,400
Total operating expenses $20,650
Income from operations $33,760
Other income (expense):
Net income $33,760
Done.
