Question

The following information pertains to the most recent quarter ended Dec 31, 2022, at Brilliant Production Limited. Purchases of raw materials $ 378,000 Raw materials inventory, beginning 44,800 Raw materials inventory, ending 74,000 Depreciation, factory 198,000 Insurance, factory 21,200 Direct labour 248,400 Maintenance, factory 124,800 Administrative expenses 289,600 Sales 2,088,000 Utilities, factory 114,000 Supplies, factory 4,120 Selling expenses 330,800 Indirect labour 268,400 Work in process inventory, beginning 28,600 Work in process inventory, ending 122,400 Finished goods inventory, beginning 41,800 Finished goods inventory, ending 167,200 ________________________________________ Requirement 1: 50mks 1. Prepare a schedule of cost of goods manufactured for the quarter ended Dec 31, 2022. Requirement 2: 30mks 2. Prepare an income statement for the quarter ended Dec 31, 2022. Requirement 3: 10mks 3. Assume that the company produced the equivalent of 11,000 units of product during the quarter. What was the average cost per unit for direct labour? What was the average cost per unit for factory insurance? (Round your answers to 2 decimal places.) Requirement 4: 10mks 4. Assume that the company expects to produce 13,000 units of product during the coming quarter. What average cost per unit and what total cost would you expect the company to incur for direct materials at this level of activity? For factory insurance? (In preparing your answer, assume that direct materials is a variable cost and that factory insurance is a fixed cost.) (Round "Average cost per unit" answers to 2 decimal places.)

Answer 1

Cost of goods manufactured and income statement calculations are fundamental in understanding a company's production costs and financial performance. The average cost per unit is determined by total costs divided by output. For future projections, variable costs per unit may vary while fixed costs per unit decrease with higher production.

Step-by-step explanation:

The calculation of the cost of goods manufactured (COGM) involves adding the total manufacturing costs to the beginning work in the process inventory and then subtracting the ending work in the process inventory. The formula looks like this: COGM = Beginning WIP + Total Manufacturing Costs – Ending WIP.

For Brilliant Production Limited, the total manufacturing costs would include direct materials (which is calculated by adding beginning raw materials to purchases and then subtracting ending raw materials), direct labor, and manufacturing overhead (which includes depreciation, factory insurance, maintenance, utilities, and indirect labor).

Similarly, the income statement would include the cost of goods sold (which is calculated from the COGM), the administrative expenses, and selling expenses, and would subtract these from the sales to determine the net income.

For average cost per unit, the total cost is divided by the number of units produced. Hence, for direct labor, the average cost per unit would be the direct labor costs divided by the number of units produced. Similarly, for factory insurance, the average cost per unit would be the total factory insurance cost divided by the number of units produced, although this would remain fixed regardless of the number of units as it is a fixed cost.

Expectations for the coming quarter take into account that direct materials are variable costs while factory insurance is a fixed cost. As production increases, the average cost per unit of direct materials may change, but the factory insurance cost per unit would decrease since it is spread over more units.