The following information pertains to Skylark Manufacturing Corporation for the year ended December 31, 20--. Sales $244,500 Purchases of materials 44,000 Indirect labor 8,300 Indirect materials 3,000 Depreciation of factory equipment 3,700 Depreciation of factory building 4,500 Selling expenses 11,000 Other factory overhead expenses 12,000 Direct labor 89,000 Materials inventory, December 31, 20-- 9,000 Work in process, January 1, 20-- 18,000 Materials inventory, January 1, 20-- 6,000 Work in process, December 31, 20-- 22,500 Finished goods, January 1, 20-- 29,000 Finished goods, December 31, 20-- 22,000 Complete the statement of cost of goods manufactured.
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
| Sales |
$244,500 |
| Purchases of materials |
44,000 |
| Indirect labor |
8,300 |
| Indirect materials |
3,000 |
|
3,700 |
|
| Depreciation of factory building |
4,500 |
| Selling expenses |
11,000 |
| Other factory |
12,000 |
| Direct labor |
89,000 |
| Materials inventory, December 31, 20-- |
9,000 |
| Work in process, January 1, 20-- |
18,000 |
| Materials inventory, January 1, 20-- |
6,000 |
| Work in process, December 31, 20-- |
22,500 |
| Finished goods, January 1, 20-- |
29,000 |
| Finished goods, December 31, 20-- |
22,000 |
Complete the statement of cost of goods manufactured.
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