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Chapter 16: Q16-10SE (page 888)

Computing cost of goods sold, manufacturing company

Use the following information to calculate the cost of goods sold for The Ellis Company for the month of June:

Finished Goods Inventory:

Beginning Balance $ 30,000

Ending Balance 10,000

Cost of Goods Manufactured 165,000

Short Answer

Expert verified

The cost of goods sold is computed as $185,000

Step by step solution

01

Definition of Finished goods

The finished goods are defined as goods which converted to the end product from the raw materials.

02

Computation of Cost of goods sold

Costs of goods solds=Begining balance+Cost of goods manufacture-Ending balance

=$30,000+$1,65,000-$10,000

=$1,85,000

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Most popular questions from this chapter

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

11.Salary of the sales manager

Calculating unit cost per service

Marx and Tyler provides hair-cutting services in the local community. In February, the business cut the hair of 190 clients, earned \(4,800 in revenues, and incurred the following operating costs:

Hair Supplies Expense \) 950

Wages Expense 548

Utilities Expense 190

Depreciation Expense—Equipment 60

What was the cost of service to provide one haircut?

Question:Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company

Gourmet Bones manufactures its own brand of pet chew bones. At the end of December 2018, the accounting records showed the following:

Balances: Beginning Ending

Direct Materials \( 13,500 \) 7,500

Work-in-Process Inventory 0 3,500

Finished Goods Inventory 0 5,200

Other information:

Direct materials purchases$ 36,000

Plant janitorial services 700

Sales salaries 6,000

Delivery costs1,300

Net sales revenue 107,000

Utilities for plant 1,300

Rent on plant 17,000

Customer service hotline costs 1,200

Direct labor23,000

Requirements

1. Prepare a schedule of cost of goods manufactured for Gourmet Bones for the year ended December 31, 2018.

2. Prepare an income statement for Gourmet Bones for the year ended December 31, 2018.

3. How does the format of the income statement for Gourmet Bones differ from the income statement of a merchandiser?

4. Gourmet Bones manufactured 17,900 units of its product in 2018. Compute the company’s unit product cost for the year, rounded to the nearest cent.

Winnebago Industries, Inc. is a leading manufacturer of recreational vehicles (RVs), including motorized and towable products. The company designs, develops, manufactures, and markets RVs as well as supporting products and services. The RVs are sold to consumers through a dealer network. On the August 29, 2015, balance sheet, Winnebago reported inventory of approximately \(112 million. Of this amount, approximately \)12 million, about 11%, was Finished Goods Inventory (Notes to Consolidated Financial Statements, Note 3). Suppose Winnebago motor homes have an average sales price of $96,000 and cost of goods sold is 89% of sales. Thor Industries, Inc., a major competitor, has an average cost of goods sold of 86% of sales. For year ending August 29, 2015, Winnebago sold 9,097 motor homes (Form 10-K, Item 1 Business).

Requirements

1. Why would the Finished Goods Inventory be such a relatively small portion of total inventory?

2. What is the average cost of goods sold (in dollars) for a Winnebago motor home? What is the average gross profit?

3. If Winnebago could reduce production costs so that the average cost of goods sold is equal to their competitor’s average cost of goods sold, how much more profit would Winnebago earn on each motor home sold?

4. Based on 2015 sales, how much would operating income increase if the company reduced the average cost of goods sold to equal their competitor’s average cost of goods sold?

5. How could managers at Winnebago use managerial accounting to reduce costs and increase profits?

Making ethical decisions

Sue Peters is the controller at Vroom, a car dealership. Dale Miller recently has been hired as the bookkeeper. Dale wanted to attend a class in Excel spreadsheets, so Sue temporarily took over Dale’s duties, including overseeing a fund used for gas purchases before test drives. Sue found a shortage in the fund and confronted Dale when he returned to work. Dale admitted that he occasionally uses the fund to pay for his own gas. Sue estimated the shortage at $450.

Requirements 1. What should Sue Peters do?

See all solutions

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