The following data refer to Laredo Luggage Company for the year 20x2: Sales reve

Question

The following data refer to Laredo Luggage Company for the year 20x2:
Sales revenue .................................................................................................................................. $475,000
Work-in-process inventory, December 31 .......................................................................................... 15,000
Work-in-process inventory, January 1 ............................................................................................... 20,000
Selling and administrative expenses .................................................................................................. 75,000
Income tax expense ......................................................................................................................... 45,000
Purchases of raw material ................................................................................................................ 90,000
Raw-material inventory, December 31 ............................................................................................... 12,500
Raw-material inventory, January 1 .................................................................................................... 20,000
Direct labor ..................................................................................................................................... 100,000
Utilities: plant ................................................................................................................................... 20,000
Depreciation: plant and equipment .................................................................................................... 30,000
Finished-goods inventory, December 31 ............................................................................................ 25,000
Finished-goods inventory, January 1 ................................................................................................. 10,000
Indirect material used ....................................................................................................................... 5,000
Indirect labor ................................................................................................................................... 7,500
Other manufacturing overhead .......................................................................................................... 40,000

Required:
1. Prepare Laredo Luggage’s schedule of cost of goods manufactured for the year.
2. Prepare Laredo Luggage’s schedule of cost of goods sold for the year.
3. Prepare Laredo Luggage’s income statement for the year.
4. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements.
Show how both cost schedules and the income statement will change if raw-material purchases
amounted to $92,000 and indirect labor was $9,000.

Explanation / Answer

Solution:

1) Preparing Laredo Luggage's Schedule of Cost of Goods Manufactured for the Year:

LAREDO LUGGAGE COMPANY

SCHEDULE OF COST OF GOODS MANUFACTURED

FOR THE YEAR ENDED DECEMBER 31, 20X2

2) Preparing Laredo Luggage's Schedule of Cost of Goods Sold for the Year:

LAREDO LUGGAGE COMPANY

SCHEDULE OF COST OF GOODS SOLD

FOR THE YEAR ENDED DECEMBER 31, 20X2

3) Preparing Laredo Luggages Income Statement for the Year:

LAREDO LUGGAGE COMPANY

INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 20X2

LAREDO LUGGAGE COMPANY

SCHEDULE OF COST OF GOODS MANUFACTURED

FOR THE YEAR ENDED DECEMBER 31, 20X2

Direct material: Raw-material inventory, January 1 $20,000 Add: Purchases of raw material $90,000 Raw material available for use $110,000 Deduct: Raw-material inventory, December 31 ($12,500) Raw material used $97,500 Direct labor $100,000 Manufacturing overhead: Indirect material $5,000 Indirect labor $7,500 Utilities: plant $20,000 Depreciation: plant and equipment $30,000 Other $40,000 Total manufacturing overhead $102,500 Total manufacturing costs . $300,000 Add: Work-in-process inventory, January 1. $20,000 Subtotal $320,000 Deduct: Work-in-process inventory, December 31 ($15,000) Cost of goods manufactured $305,000

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