Leather Authentic Company is a manufacturer of leather cases for tablets. The following information pertains to operations during the 2023 calendar year. Sales Revenue Direct Factory Labor Indirect Factory Labor Total Depreciation¹ $14,275,000 3,877,400 1,232,250 400,000 Total Utilities 2 525,000 Distribution & Customer Service Costs 76,800 Hireage of Special Labeling Equipment Insurance on Plant & Equipment Property Taxes 3 Administrative Wages & Salaries Advertising Expenses Sales Commission 6% of Sales Revenue 1 Of the total depreciation, 80% relates to factory plant & equipment and 20% relates to general and administrative costs. 2 Of the total utilities, 75% relates to production and 25% relates to general and administrative costs. 3 The property taxes should be shared: 85% production & 15% general & administrative costs The following additional information is also available: 75,200 585,000 90,000 1,076,000 57,700 Inventory Data: 1/1/2023 Purchases 31/12/2023 Raw Materials $750,000 $4,330,000 $807,000 Indirect Materials 55,000 320,000 71,500 Work in Progress 1,115,400 n/a 924,000 Finished Goods 1,142,600 n/a 1,720,200 Required: a) Calculate the raw material used by Leather Authentic Company. b) Calculate the indirect materials used by Leather Authentic Company (2 marks) (2 marks) c) What is the total manufacturing overhead cost incurred by Leather Authentic Company during the period? d) Determine the prime cost & conversion cost of the cases manufactured. (3 marks) (3 marks) e) Prepare a schedule of cost of goods manufactured for the year ended December 31, 2023, clearly showing total manufacturing cost & total manufacturing costs to account for. (5 marks) f) Prepare an income statement for Leather Authentic Company for the year ended December 31, 2023. List the non-manufacturing overheads in order of size starting with the largest. (6½ marks) g) What is the selling price per case if Leather Authentic manufactured 9,600 cases for tablets for the year and uses a mark-up of 50% on cost? (2 marks) h) How does the format of the income statement for a manufacturing concern differ from the income statement of a merchandising entity? (1½ marks) Necks Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries of the "Never Die" brand at a total cost of $168,200. The following transactions, relating to the "NeverDie" brand were completed during the quarter: October 5 October 14 October 22 November 10 November 12 November 27 November 30 December 2 December 15 December 30 Purchased 15 batteries at a cost of $17,020 each. Sold 18 batteries at $22,250 per battery Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount. Sold 15 batteries to Sammy's Auto Ltd and 10 batteries to Chill's Auto Detailing at a price of $23,990 each. Owing to an increased demand for this brand of batteries, 30 batteries were purchased on account at a cost of $17,612 each. In addition, Necks Auto paid $288 in cash on each battery to have the inventory shipped from the vendor's warehouse to their location. Sold 23 batteries which yielded total sales revenue of $576,840. (8 of these batteries were sold on account to Sassy Motors & Auto Accessories a longstanding customer) A customer, to whom 5 batteries were sold at the end of the business day on November 27, returned 2 units, as they were of the "Bongtolast" brand. In preparation for the festive season, Necks purchased 25 batteries at a total cost of $474,500. 5 of the batteries purchased on December 2 were returned to the supplier, as the poles were either corroded or otherwise badly damaged. Sold 22 batteries to two customers (XL Traders & Sassy Motors Auto Accessories) at a selling price of $26,950 each. December 31 An actual count of inventory was carried out which revealed that there were 9 units of the "NeverDie" brand in the warehouse. All purchases were on account and received on the dates stated. Required: a) Prepare a perpetual inventory record for Necks Auto, using the first in, first out (FIFO) method of inventory valuation to determine the value of ending inventory at December 31, 2020, and the total amount to be assigned to cost of goods sold for the period. (20 marks) b) Given that selling, distribution and administrative costs associated with the NeverDie brand of batteries for the quarter were $23,445, $10,250 and $75,435 respectively, prepare an income statement for Necks Auto (NeverDie) for the quarter ended December 31, 2020, to determine the net profit for the quarter. (6 marks) c) Journalize the transactions on November 12 and November 27, assuming the freight was paid by cash and the business uses a: Periodic inventory system. Perpetual inventory system (7 marks) d) Explain the difference between a product cost and a period cost. How does the product cost of a manufacturer differ from the product cost of a merchandiser? (2 marks)

Leather Authentic Company is a manufacturer of leather cases for tablets. The following information pertains to operations during the 2023 calendar year. Sales Revenue Direct Factory Labor Indirect Factory Labor Total Depreciation¹ $14,275,000 3,877,400 1,232,250 400,000 Total Utilities 2 525,000 Distribution & Customer Service Costs 76,800 Hireage of Special Labeling Equipment Insurance on Plant & Equipment Property Taxes 3 Administrative Wages & Salaries Advertising Expenses Sales Commission 6% of Sales Revenue 1 Of the total depreciation, 80% relates to factory plant & equipment and 20% relates to general and administrative costs. 2 Of the total utilities, 75% relates to production and 25% relates to general and administrative costs. 3 The property taxes should be shared: 85% production & 15% general & administrative costs The following additional information is also available: 75,200 585,000 90,000 1,076,000 57,700 Inventory Data: 1/1/2023 Purchases 31/12/2023 Raw Materials $750,000 $4,330,000 $807,000 Indirect Materials 55,000 320,000 71,500 Work in Progress 1,115,400 n/a 924,000 Finished Goods 1,142,600 n/a 1,720,200 Required: a) Calculate the raw material used by Leather Authentic Company. b) Calculate the indirect materials used by Leather Authentic Company (2 marks) (2 marks) c) What is the total manufacturing overhead cost incurred by Leather Authentic Company during the period? d) Determine the prime cost & conversion cost of the cases manufactured. (3 marks) (3 marks) e) Prepare a schedule of cost of goods manufactured for the year ended December 31, 2023, clearly showing total manufacturing cost & total manufacturing costs to account for. (5 marks) f) Prepare an income statement for Leather Authentic Company for the year ended December 31, 2023. List the non-manufacturing overheads in order of size starting with the largest. (6½ marks) g) What is the selling price per case if Leather Authentic manufactured 9,600 cases for tablets for the year and uses a mark-up of 50% on cost? (2 marks) h) How does the format of the income statement for a manufacturing concern differ from the income statement of a merchandising entity? (1½ marks) Necks Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries of the "Never Die" brand at a total cost of $168,200. The following transactions, relating to the "NeverDie" brand were completed during the quarter: October 5 October 14 October 22 November 10 November 12 November 27 November 30 December 2 December 15 December 30 Purchased 15 batteries at a cost of $17,020 each. Sold 18 batteries at $22,250 per battery Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount. Sold 15 batteries to Sammy's Auto Ltd and 10 batteries to Chill's Auto Detailing at a price of $23,990 each. Owing to an increased demand for this brand of batteries, 30 batteries were purchased on account at a cost of $17,612 each. In addition, Necks Auto paid $288 in cash on each battery to have the inventory shipped from the vendor's warehouse to their location. Sold 23 batteries which yielded total sales revenue of $576,840. (8 of these batteries were sold on account to Sassy Motors & Auto Accessories a longstanding customer) A customer, to whom 5 batteries were sold at the end of the business day on November 27, returned 2 units, as they were of the "Bongtolast" brand. In preparation for the festive season, Necks purchased 25 batteries at a total cost of $474,500. 5 of the batteries purchased on December 2 were returned to the supplier, as the poles were either corroded or otherwise badly damaged. Sold 22 batteries to two customers (XL Traders & Sassy Motors Auto Accessories) at a selling price of $26,950 each. December 31 An actual count of inventory was carried out which revealed that there were 9 units of the "NeverDie" brand in the warehouse. All purchases were on account and received on the dates stated. Required: a) Prepare a perpetual inventory record for Necks Auto, using the first in, first out (FIFO) method of inventory valuation to determine the value of ending inventory at December 31, 2020, and the total amount to be assigned to cost of goods sold for the period. (20 marks) b) Given that selling, distribution and administrative costs associated with the NeverDie brand of batteries for the quarter were $23,445, $10,250 and $75,435 respectively, prepare an income statement for Necks Auto (NeverDie) for the quarter ended December 31, 2020, to determine the net profit for the quarter. (6 marks) c) Journalize the transactions on November 12 and November 27, assuming the freight was paid by cash and the business uses a: Periodic inventory system. Perpetual inventory system (7 marks) d) Explain the difference between a product cost and a period cost. How does the product cost of a manufacturer differ from the product cost of a merchandiser? (2 marks)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Leather Authentic Company is a manufacturer of leather cases for tablets. The following information pertains to
operations during the 2023 calendar
year.
Sales Revenue
Direct Factory Labor
Indirect Factory Labor
Total Depreciation¹
$14,275,000
3,877,400
1,232,250
400,000
Total Utilities 2
525,000
Distribution & Customer Service Costs
76,800
Hireage of Special Labeling Equipment
Insurance on Plant & Equipment
Property Taxes 3
Administrative Wages & Salaries
Advertising Expenses
Sales Commission
6% of Sales Revenue
1 Of the total depreciation, 80% relates to factory plant & equipment and 20% relates to general and administrative
costs.
2 Of the total utilities, 75% relates to production and 25% relates to general and administrative costs.
3 The property taxes should be shared: 85% production & 15% general & administrative costs
The following additional information is also available:
75,200
585,000
90,000
1,076,000
57,700
Inventory Data:
1/1/2023 Purchases 31/12/2023
Raw Materials
$750,000 $4,330,000
$807,000
Indirect Materials
55,000 320,000
71,500
Work in Progress 1,115,400
n/a
924,000
Finished Goods
1,142,600
n/a
1,720,200
Required:
a) Calculate the raw material used by Leather Authentic Company.
b) Calculate the indirect materials used by Leather Authentic Company
(2 marks)
(2 marks)
c) What is the total manufacturing overhead cost incurred by Leather Authentic Company during the period?
d) Determine the prime cost & conversion cost of the cases manufactured.
(3 marks)
(3 marks)
e) Prepare a schedule of cost of goods manufactured for the year ended December 31, 2023, clearly showing
total manufacturing cost & total manufacturing costs to account for.
(5 marks)
f) Prepare an income statement for Leather Authentic Company for the year ended December 31, 2023. List
the non-manufacturing overheads in order of size starting with the largest. (6½ marks)
g) What is the selling price per case if Leather Authentic manufactured 9,600 cases for tablets for the year
and uses a mark-up of 50% on cost?
(2 marks)
h) How does the format of the income statement for a manufacturing concern differ from the income statement
of a merchandising entity?
(1½ marks)

Transcribed Image Text:Necks Auto are retailers who purchase and sell vehicle parts & accessories, including batteries. The business uses a perpetual inventory system and began the last quarter of 2020 with merchandise inventory of 10 batteries of the "Never Die" brand at a total cost of $168,200. The following transactions, relating to the "NeverDie" brand were completed during the quarter: October 5 October 14 October 22 November 10 November 12 November 27 November 30 December 2 December 15 December 30 Purchased 15 batteries at a cost of $17,020 each. Sold 18 batteries at $22,250 per battery Purchased 24 batteries at a cost of $18,175 each but the supplier gave a 4% quantity discount. Sold 15 batteries to Sammy's Auto Ltd and 10 batteries to Chill's Auto Detailing at a price of $23,990 each. Owing to an increased demand for this brand of batteries, 30 batteries were purchased on account at a cost of $17,612 each. In addition, Necks Auto paid $288 in cash on each battery to have the inventory shipped from the vendor's warehouse to their location. Sold 23 batteries which yielded total sales revenue of $576,840. (8 of these batteries were sold on account to Sassy Motors & Auto Accessories a longstanding customer) A customer, to whom 5 batteries were sold at the end of the business day on November 27, returned 2 units, as they were of the "Bongtolast" brand. In preparation for the festive season, Necks purchased 25 batteries at a total cost of $474,500. 5 of the batteries purchased on December 2 were returned to the supplier, as the poles were either corroded or otherwise badly damaged. Sold 22 batteries to two customers (XL Traders & Sassy Motors Auto Accessories) at a selling price of $26,950 each. December 31 An actual count of inventory was carried out which revealed that there were 9 units of the "NeverDie" brand in the warehouse. All purchases were on account and received on the dates stated. Required: a) Prepare a perpetual inventory record for Necks Auto, using the first in, first out (FIFO) method of inventory valuation to determine the value of ending inventory at December 31, 2020, and the total amount to be assigned to cost of goods sold for the period. (20 marks) b) Given that selling, distribution and administrative costs associated with the NeverDie brand of batteries for the quarter were $23,445, $10,250 and $75,435 respectively, prepare an income statement for Necks Auto (NeverDie) for the quarter ended December 31, 2020, to determine the net profit for the quarter. (6 marks) c) Journalize the transactions on November 12 and November 27, assuming the freight was paid by cash and the business uses a: Periodic inventory system. Perpetual inventory system (7 marks) d) Explain the difference between a product cost and a period cost. How does the product cost of a manufacturer differ from the product cost of a merchandiser? (2 marks)

Expert Solution