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Lecture 5.2-General Cost Classifications (Problem 2)

The document provides accounting data for Klear-Seal Company for the previous year, including costs of raw materials, labor, manufacturing overhead, and inventory levels. Management wants to organize this data to prepare financial statements, and tasks are to prepare a schedule of cost of goods manufactured, compute cost of goods sold, and prepare a profit and loss account using the other calculations. A solution is provided that fulfills all three tasks by organizing the data into the requested schedules and statements.

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Nazmul-Hassan Sumon
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2K views

Lecture 5.2-General Cost Classifications (Problem 2)

The document provides accounting data for Klear-Seal Company for the previous year, including costs of raw materials, labor, manufacturing overhead, and inventory levels. Management wants to organize this data to prepare financial statements, and tasks are to prepare a schedule of cost of goods manufactured, compute cost of goods sold, and prepare a profit and loss account using the other calculations. A solution is provided that fulfills all three tasks by organizing the data into the requested schedules and statements.

Uploaded by

Nazmul-Hassan Sumon
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Problem: 02

The following information has been taken from the accounting records of Klear-Seal Company for last
year:

Selling expense $140,000


Raw materials stock, 1 January 90,000
Raw material stock, 31 December 60,000
Utilities, factory 36,000
Direct Labor cost 150,000
Depreciation, factory 162,000
Purchase of raw material 750,000
Sales 2,500,000
Insurance, factory 40,000
Supplies, factory 15,000
Administrative expenses 270,000
Indirect labor 300,000
Maintenance, factory 87,000
Work in progress stock, 1 January 180,000
Work in progress stock, 31 December 100,000
Finished goods stock, 1 January 260,000
Finished goods stock, 31 December 210,000

Management wants to organize these data into a better format so that financial statements can be
prepared for the year.

Required:
1. Prepare a schedule of cost of goods manufactured.
2. Compute the cost of goods sold
3. Using data as needed from 1 & 2 above, prepare a profit and loss account.

Solution:

Kiear-Seal Company
Schedule of cost of goods manufactured
For the year ended 31 December
Req-1 Cost of Goods Manufactured
Direct Materials:
Raw materials stock, 1 January $90,000
Add: Purchases of raw materials 750,000
Raw materials available for use 840,000
Deduct: Raw materials stock, 31 December 60,000
Raw materials used in production $780,000
Direct Labor 150,000
Manufacturing overhead:
Utilities, factory 36,000
Depreciation, factory 162,000
Insurance, factory 40,000
Supplies, factory 15,000
Indirect labor 300,000
Maintenance, factory 87,000
Total overhead costs 640,000
Total manufacturing costs 1,570,000
Add: Work in progress stock, 1 January 180,000
1,750,000
Deduct: Work in progress stock, 31 December 100,000
Cost of goods manufactured $1,650,000

Req-2: Cost of goods sold


Finished goods stock, 1 January $260,000
Add: Cost of goods manufactured 1,650,000
Goods available for sale 1,910,000
Deduct: Finished goods stock, 31 December 210,000
Cost of goods sold $1,700,000

Req-3: Profit
Sales $2,500,000
Less: Cost of goods sold 1,700,000
Gross margin 800,000
Less: Selling and Administrative expenses:
Selling expenses $140,000
Administrative expenses 270,000
Total expenses 410,000
Profit $390,000

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