Ellerson Company provided the following information for the last calendar year: Beginning inventory: Direct materials $68,000 Work in process 29,400 Finished goods 43,200 Ending inventory: Direct materials $70,400 Work in process 40,000 Finished goods 42,100 During the year, direct materials purchases amounted to $278,000, direct labor cost was $189,000, and overhead cost was $523,000. During the year, 100,000 units were completed. Last calendar year, Ellerson recognized revenue of $1,312,000 and had selling and administrative expenses of $204,600. 1. What is the cost of goods sold for last year? 2. Prepare an income statement for Ellerson for last year.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Ellerson Company provided the following information for the last calendar year:
| Beginning inventory: | |
| Direct materials | $68,000 |
| Work in process | 29,400 |
| Finished goods | 43,200 |
| Ending inventory: | |
| Direct materials | $70,400 |
| Work in process | 40,000 |
| Finished goods | 42,100 |
During the year, direct materials purchases amounted to $278,000, direct labor cost was $189,000, and overhead cost was $523,000. During the year, 100,000 units were completed.
Last calendar year, Ellerson recognized revenue of $1,312,000 and had selling and administrative expenses of $204,600.
1. What is the cost of goods sold for last year?
2. Prepare an income statement for Ellerson for last year.
Income statement means a statement which shown all revenue , gains , expenses and losses of the business during the given period of time.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
