Financial Statements of a Manufacturing Firm The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors: Purchased $250,000 of materials. Used $180,000 of direct materials in production. Incurred $450,000 of direct labor wages. Incurred $180,000 of factory overhead. Transferred $760,000 of work in process to finished goods. Sold goods for $1,200,000. Sold goods with a cost of $675,000. Incurred $215,000 of selling expense. Incurred $125,000 of administrative expense. Using the information given, complete the following: a. Prepare the January income statement for Sorensen Manufacturing Company.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Financial Statements of a Manufacturing Firm
The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors:
- Purchased $250,000 of materials.
- Used $180,000 of direct materials in production.
- Incurred $450,000 of direct labor wages.
- Incurred $180,000 of factory overhead.
- Transferred $760,000 of work in process to finished goods.
- Sold goods for $1,200,000.
- Sold goods with a cost of $675,000.
- Incurred $215,000 of selling expense.
- Incurred $125,000 of administrative expense.
Using the information given, complete the following:
a. Prepare the January income statement for Sorensen Manufacturing Company.
| Sorensen Manufacturing Company | ||
| Income Statement | ||
| For the Month Ended January 31 | ||
| $ | ||
| $ | ||
| Operating expenses: | ||
| $ | ||
| Total operating expenses | ||
| $ |
b. Determine the inventory balances at the end of the first month of operations.
| Sorensen Manufacturing Company | |
| Inventory Balances | |
| For the Month Ended January 31 | |
| Inventory balances on January 31: | |
| Materials | $ |
| Work in process | |
| Finished goods |
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