Cost of goods manufactured, cost of goods sold, and income statement

Buck & Company incurred the following costs during August:

 

 

 

 

 

 

 

 

 

Raw materials purchased  . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,140 Direct labor ($12.50 per hour) . . . . . . . . . . . . . . . . . . . . . . . . 57,500 Manufacturing overhead (actual) . . . . . . . . . . . . . . . . . . . . . . 90,300 Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,800 Administrative expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,700 Interest expense  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,400   Â

Manufacturing overhead is applied on the basis of $20 per direct labor hour. Assume that overapplied or underapplied overhead is transferred to cost of goods sold only at the end of the year. During the month, 4,200 units of product were manufactured and 4,400 units of product were sold. On August 1 and August 31, Buck & Company car- ried the following inventory balances:

 

 

Raw materials . . . . . . . . . . . . . . . . . . . . . . . .	August 1 $19,600	August 31 $17,900
Work in process . . . . . . . . . . . . . . . . . . . . . .	53,200	57,400
Finished goods . . . . . . . . . . . . . . . . . . . . . . .	41,800	32,700

 

Required:

a.       Prepare a statement of cost of goods manufactured for the month of August and calculate the average cost per unit of product manufactured.

b.      Calculate the cost of goods sold during August.

c.       Calculate the difference between cost of goods manufactured and cost of goods sold. How will this amount be reported in the financial statements?

d.      (Optional) Prepare a traditional (absorption) income statement for Buck & Company for the month of August. Assume that sales for the month were

$272,800 and the company’s effective income tax rate was 34%.

 

 

 

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