Data P2-1 Various cost and sales data for Meriwell Company for the just complete

ID: 2418677 • Letter: D

Question

Data P2-1 Various cost and sales data for Meriwell Company for the just completed year appear in the worksheet below. MERIWELL COMPANY Finished goods inventory, beginning $20,000 Finished goods inventory, ending 40,000 Depreciation, factory 27,000 Administrative expenses 110,000 Utilities, factory 8,000 Maintenance, factory 40,000 Supplies, factory 11,000 Insurance, factory 4,000 Purchase of raw materials 125,000 Raw materials inventory, beginning 9,000 Raw materials inventory, ending 6,000 Direct labor 70,000 Indirect labor 15,000 Work in process inventory, beginning 17,000 Work in process inventory, ending 30,000 Sales 500,000 Selling Expenses 80,000 Required 1. Prepare a schedule of cost of goods manufactured. 2. Prepare an income statement 3. Assume that the company produced the equivalent of 10,000 units of product during the year just completed. What was the average cost per unit for direct materials? What was the average cost per unit for factory depreciation? 4. Assume that the company expects to produce 15,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For factory depreciation? Assume that depreciation is computed on a straight-line basis. Data P2-1 Various cost and sales data for Meriwell Company for the just completed year appear in the worksheet below. MERIWELL COMPANY Finished goods inventory, beginning $20,000 Finished goods inventory, ending 40,000 Depreciation, factory 27,000 Administrative expenses 110,000 Utilities, factory 8,000 Maintenance, factory 40,000 Supplies, factory 11,000 Insurance, factory 4,000 Purchase of raw materials 125,000 Raw materials inventory, beginning 9,000 Raw materials inventory, ending 6,000 Direct labor 70,000 Indirect labor 15,000 Work in process inventory, beginning 17,000 Work in process inventory, ending 30,000 Sales 500,000 Selling Expenses 80,000 Required 1. Prepare a schedule of cost of goods manufactured. 2. Prepare an income statement 3. Assume that the company produced the equivalent of 10,000 units of product during the year just completed. What was the average cost per unit for direct materials? What was the average cost per unit for factory depreciation? 4. Assume that the company expects to produce 15,000 units of product during the coming year. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For factory depreciation? Assume that depreciation is computed on a straight-line basis.

Explanation / Answer

Cost of goods manufactured

Raw materials inventory beginning $9,000

Add:Purchases 125,000

less:Closing inventory (6,000)

Raw materials used $128,000

Add:Direct labor 70,000

add:Manufacturing cost

Depreciation factory $27,000

Utilities factory 8,000

Maintenance factory 40,000

Supplies factory 11,000

Insurance factory 4,000

Indirect labor 15,000 (105,000)

Total cost incurred $303,000

Add:opening WIP 17,000

less:Work in process inventory (30,000)

Cost of goods manufactured $290,000

Income Statement

Sales $500,000

Less:Cost of goods sold

(20,000+290,000 - $40,000) 270,000

Gross profit $230,000

Less:Operating expense

Administrative expense 110,000

Selling expenses 80,000 190,000

Net income 40,000