Prime Cost, Conversion Cost, Preparation of Income Statement: Manufacturing Firm

Question

Prime Cost, Conversion Cost, Preparation of Income Statement: Manufacturing Firm

Kildeer Company makes easels for artists. During the last calendar year, a total of 38,000 easels were made, and 39,000 were sold for $56 each. The actual unit cost is as follows:

The selling expenses consisted of a commission of $0.80 per unit sold and advertising co-payments totaling $91,500. Administrative expenses, all fixed, equaled $179,000. There were no beginning and ending work-in-process inventories. Beginning finished goods inventory was $130,200 for 3,100 easels.

Required:

1. Calculate the number and the dollar value of easels in ending finished goods inventory.

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Remember that cost of goods manufactured increases finished goods inventory.

2. Prepare a cost of goods sold statement.

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See Cornerstone 2.3

3. Prepare an absorption-costing income statement. In addition to dollar amounts, enter the amounts as a percent, rounded to two decimal places. For example, .5235 would be 52.35% and you would enter 52.35 as your answer.

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See Cornerstone 2.4

Direct materials $15.00 Direct labor 6.00 Variable overhead 7.00 Fixed overhead 14.00 Total unit cost $42.00

Explanation / Answer

1.

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3.

Ending units 2100 Dollar amount (2100 x $42) $ 88,200

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