Problem:
Cost of goods manufactured, cost of goods sold, and income statement Big Thunder Co. incurred the following costs during April:
|
Raw materials purchased
|
$ 99,225
|
|
Direct labor ($15 per hour)
|
123,750
|
|
Manufacturing overhead (actual)
|
303,175
|
|
Selling expenses
|
67,050
|
|
Administrative expenses
|
33,075
|
|
Interest expense
|
11,490
|
Manufacturing overhead is applied on the basis of $37.50 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, 7,500 units of product were manufactured and 7,950 units of product were sold. On April 1 and April 30, Big Thunder Co. carried the following inventory balances:
|
April 1
|
April 30
|
|
Raw materials
|
$ 41,160
|
$ 37,590
|
|
Work in process
|
111,720
|
119,640
|
|
Finished goods
|
88,000
|
56,320
|
Required:
a. Prepare a statement of cost of goods manufactured for the month of April and calculate the average cost per unit of product manufactured.
b. Calculate the cost of goods sold during April.
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 Big Thunder Co. for the month of April. Assume that sales for the month were $722,925 and the company's effective income tax rate was 40%.