Distinguish between manufacturing & non-manufacturing overhead (product versus period costs)
Distinguish between manufacturing & non-manufacturing overhead (product versus period costs) 2) Classify costs as prime costs or conversion costs 3) Prepare a statement of cost of goods manufactured, clearly showing total
Pro-Leather Company is a manufacturer of leather cases for tablets. The following information pertains to operations during the 2020 calendar year.
|
Sales Revenue |
$14,275,000 |
|
Direct Factory Labor |
3,952,600 |
|
Indirect Factory Labor |
1,232,250 |
|
Total |
1 400,000 |
|
Total Utilities |
525,000
|
|
Distribution & Customer Service Costs |
76,800
|
|
Insurance on Plant & Equipment |
585,000 |
|
Property Taxes |
90,000 |
|
Administrative wages & salaries |
1076,000 |
|
Sales Commission |
6% of Sales Revenue |
|
Sales revenue |
14,275,000 |
1.Of the total depreciation, 80% relates to factory plant & equipment and 20% relates to general and administrative costs. 2 Of the total utilities, 75% relates to production and 25% relates to general and administrative costs. 3 The property taxes should be shared: 85% production & 15% general & administrative costs.
The following additional information is also available:
|
Inventory Data: |
1/1/2020 |
Purchases |
31/12/2020 |
|
Raw materials |
$750,00 |
$4,330,000 |
$807,000 |
|
Indirect materials |
55,000 |
320,000 |
71,500 |
|
Worked in progress |
1,115,400 |
n/a |
924,000 |
|
Finished Goods |
1,142,600 |
n/a |
1720,200 |
- a) Calculate the raw material used by Pro-Leather Company. b) Calculate the indirect materials used by Pro-Leather Company c) What is the total manufacturing overhead cost incurred by Pro-Leather Company during the period? d) Determine the prime cost & conversion cost of the cases manufactured. e) Prepare a schedule of cost of goods manufactured for the year ended December 31, 2020, clearly showing total manufacturing cost & total manufacturing costs to account. Prepare an income statement for Pro-Leather Company for the year ended December 31, 2020. List the non-manufacturing overheads in order of size starting with the largest. g) What is the factory cost per case if Pro-Leather manufactured 19,200 cases for tablets for the year? h) How does the format of the income statement for a manufacturing concern differ from the income statement of a merchandising entity?
N.B. Answers to be submitted for section d, e, f, g, and h.
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