Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: EstimatedFixed Cost Estimated Variable Cost(per unit sold) Production costs: Direct materials $26 Direct labor 17 Factory overhead $114,300 13 Selling expenses: Sales salaries and commissions 23,700 6 Advertising 8,000 Travel 1,800 Miscellaneous selling expense 2,000 5 Administrative expenses: Office and officers' salaries 23,200 Supplies 2,900 2 Miscellaneous administrative expense 2,660 3 Total $178,560 $72 It is expected that 5,580 units will be sold at a price of $144 a unit. Maximum sales within the relevant range are 7,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Sales $ Cost of goods sold: Direct materials $ Direct labor Factory overhead Cost of goods sold Gross profit $ Expenses: Selling expenses: Sales salaries and commissions $ Advertising Travel Miscellaneous selling expense Total selling expenses $ Administrative expenses: Office and officers' salaries $ Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Income from operations $
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
| Estimated Fixed Cost |
Estimated Variable Cost (per unit sold) |
||||||
| Production costs: | |||||||
| Direct materials | $26 | ||||||
| Direct labor | 17 | ||||||
| Factory overhead | $114,300 | 13 | |||||
| Selling expenses: | |||||||
| Sales salaries and commissions | 23,700 | 6 | |||||
| Advertising | 8,000 | ||||||
| Travel | 1,800 | ||||||
| Miscellaneous selling expense | 2,000 | 5 | |||||
| Administrative expenses: | |||||||
| Office and officers' salaries | 23,200 | ||||||
| Supplies | 2,900 | 2 | |||||
| Miscellaneous administrative expense | 2,660 | 3 | |||||
| Total | $178,560 | $72 |
It is expected that 5,580 units will be sold at a price of $144 a unit. Maximum sales within the relevant range are 7,000 units.
Required:
1. Prepare an estimated income statement for 20Y7.
| Belmain Co. | |||
| Estimated Income Statement | |||
| For the Year Ended December 31, 20Y7 | |||
| Sales | $ | ||
| Cost of goods sold: | |||
| Direct materials | $ | ||
| Direct labor | |||
| Factory overhead | |||
| Cost of goods sold | |||
| Gross profit | $ | ||
| Expenses: | |||
| Selling expenses: | |||
| Sales salaries and commissions | $ | ||
| Advertising | |||
| Travel | |||
| Miscellaneous selling expense | |||
| Total selling expenses | $ | ||
| Administrative expenses: | |||
| Office and officers' salaries | $ | ||
| Supplies | |||
| Miscellaneous administrative expense | |||
| Total administrative expenses | |||
| Total expenses | |||
| Income from operations | $ |
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