DATA INPUT

Inventory Classification January 1, 20x1 December 31, 20x1

Raw material $ 55,000 $ 75,000
Work in process 110,000 125,000
Finished goods 160,000 155,000

Raw materials purchased 240,000

Direct labor expenses 420,000

Manufacturer overhead costs

Indirect material $ 12,000
Indirect labor 22,000
Depreciation 110,000
Utilities 23,000
Other 35,000

Sales revenue 1,210,000

Selling & Administrative 105,000

Tax rate 35%

SOLUTION

1. Schedule of Cost of Goods Manufactured

Direct Material:
Raw-material inventory $ 55,000
Add: Purchases of raw material 240,000
Raw material available for use $ 295,000
Deduct: Raw-material inventory, December 31 75,000
Raw material used $220,000
Direct labor 420,000
Manufacturing overhead:
Indirect material $ 12,000
Indirect labor 22,000
Depreciation on plant and equipment 110,000
Utilities 23,000
Other 35,000
Total manufacturing overhead 202,000
Total manufacturing costs $842,000
Add: Work-in-process inventory, January 1 110,000
Subtotal $952,000
Deduct: Work-in-process inventory, December 31 125,000
Cost of goods manufactured $827,000

2. Schedule of Cost of Goods Sold

Finished-goods inventory, January 1 $ 160,000
Add: Cost of goods available for sale 827,000
Deduct: Finished-goods inventory, December 31 $ 987,000
Cost of goods sold 155,000
$ 832,000

3. Income Statement
Sales revenue $1,210,000
Less: Cost of goods sold 832,000
Gross margin $ 378,000
Selling and administration expenses 105,000
Income before taxes $ 273,000
Income tax expense 95,550
Net income $ 177,450