Answer:
a) Cost of goods Manufactured = $610,000
b) Cost of sales = $ 580,000
c) Net income = $ 140,000
Explanation:
a) Ferruccio Fashion
Schedule of Cost of Goods Manufactured
For the Year Ended 12/31/X2
Particular $ $
Direct Materials:
Raw Materials, 1 January 40,000
Add: Purchase 180,000
Materials available for use 220,000
Less: Raw materials, 31 December 25,000
Materials used 195,000
Direct Labor 200,000
Prime Costs 395,000
Manufacturing Overhead:
Indirect Material 11,000
Indirect Labor 16,000
Plant Utilities 40,000
Depreciation, plant and equipment 60,000
Other 78,000 205,000
Total Manufacturing Costs 600,000
Add: Work-in-progress, 1 January 40,000
Less: Work-in-progress, 31 December (30,000)
Cost of goods manufactured 610,000
b) Ferruccio Fashion
Schedule of Cost of sales
For the Year Ended 12/31/X2
Particular $
Finished goods inventory, 1 January 20,000
Add: Cost of goods manufactured (From a) 610,000
Goods available for sale 630,000
Less: Finished goods inventory, 1 January (50,000)
Cost of sales 580,000
Now, this cost of sales will be used to find gross and net profit.
C) Ferruccio Fashion
Income Statement
For the Year Ended 12/31/X2
Particular $
Sales Revenue 945,000
Less: Cost of sales (From part B) 580,000
Gross Profit 365,000
Less: Selling and administrative expenses 145,000
Income before income tax 220,000
Less: Income tax expense 80,000
Net Income 140,000
