Question

Rooney Corporation began fiscal Year 2 with the following balances in its inventory accounts. Raw Materials $ 55,000 Work in Process 82,800 Finished Goods 27,800 During the accounting period, Rooney purchased $238,900 of raw materials and issued $249,400 of materials to the production department. Direct labor costs for the period amounted to $322,700, and manufacturing overhead of $46,100 was applied to Work in Process Inventory. Assume that there was no over- or underapplied overhead. Goods costing $611,600 to produce were completed and transferred to Finished Goods Inventory. Goods costing $600,400 were sold for $801,400 during the period. Selling and administrative expenses amounted to $70,100. Required Determine the ending balance of each of the three inventory accounts that would appear on the year-end balance sheet. Prepare a schedule of cost of goods manufactured and sold and an income statement.

Answer 1

Answer and Explanation:

The computation is shown below:

Ending balance of raw material inventory = Beginning inventory + Raw Material purchased - Raw materiel consumed

= $55,000 + $238,900 - $249,400

= $44,500

Ending balance of WIP = Beginning WIP + Direct material consumed + Direct labor + Manufacturing overhead applied - Cost of goods produced

= $82,800 + $238,900 + $322,700 + $46,100 - $611,600

= $78,900

Ending inventory of finished goods = Beginning inventory + Cost of goods produced - Cost of goods sold

= $27,800 + $611,600 - $600,400

= $39,000

Now the preparation is presented below:

Schedule of cost of goods manufactured

Direct Material:

Beginning balance of raw material $55,000

Add: Purchase of raw material $238,900

Less: Ending raw material balance -$44,500

Raw material used in production $249,400 (A)

Add: Direct labor $322,700 (B)

Add: Manufacturing overhead $46,100 (C)

Total manufacturing cost $618,200 (A + B + C)

Add: Beginning balance of work in process $82,800

Less: Ending balance of work in process -$78,900

Cost of goods manufactured $622,100

Add: Beginning finished goods inventory $27,800

Finished goods available for sale $649,900

Less: Ending finished goods inventory -$39,000

Cost of goods sold $610,900

Income statement

Sales revenue $801,400

Less: Cost of goods sold -$610,900

Gross Margin $190,500

Less: Selling and admin expense -$70,100

Net Operating income $120,400