P16-36B Preparing a schedule of cost of goods manufactured and an income stateme

Question

P16-36B Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company Chewy Bones manufactures its own brand of pet chew bones. At the end of Decem- ber 2018, the accounting records showed the following Balances: Direct Materials Work-in-Process Inventory Finished Goods Inventory Other information: Direct materials purchases Plant janitorial services Sales salaries Delivery costs Net sales revenue Utilities for plant Rent on plant Customer service hotline costs Direct labor Beginning Ending $13,400 10,500 1,500 5,400 $ 39,000 900 5,100 1,700 115,000 1,200 9,000 1,600 16,000 Requirements 1. Prepare a schedule of cost of goods manufactured for Chewy Bones for the year ended December 31, 2018. 2. Prepare an income statement for Chewy Bones for the year ended December 31, 2018. 3. How does the format of the income statement for Chewy Bones differ from the income statement of a merchandiser? 4. Chewy Bones manufactured 17,500 units of its product in 2018. Compute the company's unit product cost for the year, rounded to the nearest cent.

Explanation / Answer

a) Chewy Bones Schedule of Cost of Goods Manufactured Year Ended December 31, 2018 Beginning Work-in-Process Inventory $0 Direct Materials Used Beginning Raw Materials Inventory $13,400 Purchases of Raw Materials $39,000 Raw Materials Available for Use $52,400 Ending Raw Materials Inventory -$10,500 Direct Materials Used $41,900 Direct Labor $16,000 Manufacturing Overhead: Rent on Plant $9,000 Utilities for Plant $1,200 Plant Janitorial Services $900 Total Manufacturing Overhead $11,100 Total Manufacturing Costs Incurred during the Year $69,000 Total Manufacturing Costs to Account For $69,000 Ending Work-in-Process Inventory -1500 Cost of Goods Manufactured $67,500 b) Chewy Bones Income Statement Year Ended December 31, 2018 Revenue: Sales Revenue $115,000 Cost of Goods Sold: Beginning Finished Goods Inventory $0 Cost of Goods Manufactured $67,500 Cost of Goods Available for Sale $67,500 Ending Finished Goods Inventory -$5,400 Cost of Goods Sold $62,100 Gross Profit $52,900 Selling and Administrative Expenses: Customer Service Hotline Expense $1,600 Delivery Expense $1,700 Sales Salaries Expense $5,100 Total Selling and Administrative Expenses $8,400 Operating Income $44,500 c) How does the format of the income statement for chewyt Bones differ from the income statement of a merchandiser? The format of the income statement for chewy Bones are different from the income statement of a merchandiser as its cost of goods sold is based on its merchandise purchases and manufacturer's cost of goods sold is based on its cost of goods manufactured. d) Unit product cost = Cost of goods manufactured/Total units produced = $67,500/17500 units $3.86

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