(1)Cost of Good Manufactured $191,830(2)) Net income $21,547.25 (3) cost of producing one watch $2.45
Explanation:
The question is not complete, here is the missing part of the question
Premium watches inc
Income statements As at December 31st, 2018
Sales revenue (67,500 watches) 269,500
Unearned rent revenue. 4,000
Gain on sale of investment. 1,200
Royalty revenue. 500
Interest payable. 1,500
Total Revenue. 276,700
Less operating expenses
Indirect manufacturing labour cost 7,200
Utilities 9,200
Direct manufacturing labour cost 47,000
Factory equipment 50,000
Direct materials purchased 95,000
Insurance expense 2,500
Rent Expense 27,000
Interest expense 300
Selling expense 34,700
Administrative expense 30,900
Research & development expense 4,000
Short term investment 8,000
Dividend paid 500
Restructuring cost 6,000
Total operating expenses. 327,300
Net operating loss. ($50,600)
(a) 65% of utilities & 70% of insurance expense related to factory operations. Apply the remaining amount equally to selling expense & Administrative expense
(b) 90% of the rent expense is associated with factory operations. Allocate the remaining 10% equally to selling expense and Administrative expense
(c) Factory equipment is estimated to have a useful life of 5 years with a $5,000 salvage value remaining at the end of its useful life. The company uses the straight line method of depreciation.
(d) inventory balances at the beginning and ending of the period were
January 2018. Dec 31,2018
Direct materials. 4,600. 7,000
Work in process. 9,000. 12,000
Finished goods. 3,750. ?
These amount were not taken into account when the statement were prepared
(e) The company tax rate is 21%
The president is dissapointed with the result of operations and has asked you to review the income statement and make a recommendation as to whether the company should look for a buyer for its assets Required
(1) prepare a schedule cost of good manufactured for the year ended December 31, 2018
(2) prepare a corrected multiple -step income statement for the year ended 31st December, 2018
(3) Calculate the cost of producing one watch if the company produced 110,000 watches in 2018 (round your answer to 2 decimal places )
Here is the solution
Schedule cost of Goods Manufactured for the year ended December 31st, 2018
Beginning work in process inventory
Direct materials used
Add: Beginning Direct materials 4,600
Add: purchases of Direct materials 95,000
Add: Direct Labour. 47,000
Prime Cost. 146,600
Add: Manufacturing overhead
Indirect material labour cost 7,200
Utilities. 5,980
Insurance. 1,750
Rent Expense. 24,300
Depreciation of factory equipment 9,000
Add: Beginning work in process 9,000
Less: Ending work in process. 12,000
45,230
Cost of Good Manufactured. 191,830
(2) corrected Multiple - step income statement for the year ended December 31st, 2018
Sales. 269,500
Less: Cost of good sold 195,580
Gross Margin. 73,920
Operating Expenses
Utilities 3,220
Insurance 750
Selling Expense 12,145
Administrative expense 9,270
Rent allocated to selling expense 3,470
Rent allocated to Administrative expense 3,090
Research &Development expense 5,000
Prepaid insurance expense 4,000
Restructuring cost 6,000
46,945
Operating income. 26975
Interest expense. 300
Income before taxes. 27,275
Income taxes. 5,727.75
Net income. 21,547.25
(3) To calculate the cost of producing one watch if the company produced 110,000 watches in 2018
Sales / Numbers of watches produced
= 269,500 / 110,000
= $2,45
Workings of schedule of cost of Goods Manufactured
Utilities =0.65 × 9,200 = 5,980
Insurance = 0.7 × 2,500 = 1,750
Rent Expense = 0.9 × 27,000 = 24,300
Factory equipment depreciation = Cost - Salvage value / Number of years
= 50,000 - 5,000 / 5
= 45,000 /5
= 9,000
Workings of cost of Goods sold
Cost of good sold = Beginning finished good inventory + Cost of Good Manufactured - Ending finished good inventory
= 3,750 + 191,830
= 195,580
Workings of income statement
Utilities = 0.35 × 9,200 = 3,220
Insurance= 0.3 × 2,500 = 750
Selling Expense = 0.35 × 34,700 = 12,145
Administrative expense = 0.3 × 30,900 = 9,270
10% of rent expense allocated to selling & Administrative
Selling = 0.1 × 34,700 = 3,470
Administrative = 0.1 × 30,900 = 3,090
Income taxes = 0.21 × 27,275 = 5,727.75
