Chapter 14, Problem 6BTN

b.

To determine

Factory overheads.

Explanation of Solution

Compute total factory overheads as follow:

Particulars	Amount ($)
Factory supervision	122,500
Factory utilities	36,250
Factory supplied used	15,750
Factory building expense	79,750
Indirect labor	60,000
Total factory overheads	314,250

Table (1)

Hence, total factory cost is 314,250.

c.

To determine

The manufacturing cost.

Explanation of Solution

Given,

Direct labor is $650,750.

Factory overheads are 314,250.

Material used is $635,000.

Formula to calculate the manufacturing cost:

$\text{Manufacture}\text{cost}=\text{Marerial}\text{used}+\text{Factory}\text{overheads}+\text{Direct}\text{labor}$

Substitute, $635,000 for the material used, $314,250 for the factory overheads and $650,750 for the direct material,

$\begin{array}{c}\text{Manufacture}\text{cost}=\text{\$635,000}+\text{\$314,250}+\text{\$650,750}\\ =\text{\$1,599,250}\end{array}$

Hence, manufacturing cost is $1,599,250.

d.

To determine

Total cost of the work in process.

Explanation of Solution

Given,

Opening work in progress is $15,875.

Closing work in process is $14,000.

Formula to calculate the cost of work in process:

$\text{Cost}\text{of}\text{work}\text{in}\text{process}=\text{Opening}\text{balance}-\text{Closing}\text{balance}$

Substitute $15,875 for the opening balance and $14,000 for the closing balance,

$\begin{array}{c}\text{Cost}\text{of}\text{work}\text{in}\text{process}=\$15,875-\$14,000\\ =\$1,875\end{array}$

Hence, cost of work in process is $1,875.

e.

To determine

Total cost of manufactured.

Explanation of Solution

Given,

Opening finished goods is $164,375.

Closing finished goods is $129,000.

Formula to calculate the cost of the goods manufactured:

$\text{Cost}\text{of}\text{manufactured}=\text{Opening}\text{balnace}-\text{Closing}\text{balance}$

Substitute $164,375 for the opening balance and $129,000 for the closing balance,

$\begin{array}{c}\text{Cost}\text{of}\text{manufactured}=\$164,375-\$129,000\\ =\$35,375\end{array}$

Hence, cost of manufacturing is $35,375.

2.

To determine

To explain:

Checking cost of the goods manufactured match with the instructor or not.

Explanation of Solution

Yes, the cost of manufactured is matched with instructor.

3.

a.

To determine

Net sales.

Explanation of Solution

Total sale is $3,275,000.

Sales discount is $57,500.

Sales salaries expenses are $286,250.

Formula to calculate the net sales:

$\text{Net}\text{sales}=\text{Sales}-\text{Sales}\text{discount}-\text{Sales}\text{expense}$

Substitute $3,275,000 for the sales, $57,500 for the sales discount and $286,250 for the sales expense,

$\begin{array}{c}\text{Net}\text{sales}=\text{\$3,275,000}-\text{\$57,500}-\text{\$286,250}\\ =\text{\$2,931,250}\end{array}$

Hence, net sales are $2,931,250.

b.

To determine

Cost of goods sold.

Explanation of Solution

Given,

Opening finished goods is $164,375.

Closing finished goods is $129,000.

Cost of goods manufactured is $35,375.

Formula to calculate the cost of the goods sold:

$\text{Cost}\text{of}\text{goods}\text{sold}=\left(\begin{array}{l}\text{Opening}\text{balnce}+\text{Cost}\text{of}\text{goods}\text{manufactured}\\ -\text{Closing}\text{balance}\end{array}\right)$

Substitute $164,375 for the opening balance, $35,375 for the cost of goods manufacture and $129,000 for the closing balance,

$\begin{array}{c}\text{Cost}\text{of}\text{goods}\text{sold}=\$164,375+\$35,375-\$129,000\\ =\$70,750\end{array}$

Hence, cost of the goods sold is $70,750.

c.

To determine

Gross profit.

Explanation of Solution

Given,

Total sale is $3,275,000.

Cost of goods sold is $70,750.

Formula to calculate the gross profit:

$\text{Gross}\text{profit}=\text{Sales}-\text{Cost}\text{of}\text{goods}\text{sold}$

Substitute $3,275,000 for the sales and $70,750 for the cost of goods sold,

$\begin{array}{c}\text{Gross}\text{profit}=\$3,275,000-\$70,750\\ =\$3,204,250\end{array}$

Hence, gross profit is $3,204,250.

d.

To determine

Total operating expenses.

Explanation of Solution

Compute total operating expenses as follow:

Particulars	Amount ($)
Advertisement expense	19,125
Depreciation expense: Office equipment	8,750
Depreciation expense: selling equipment	10,000
Depreciation expense: factory equipment	32,500
Indirect labor	60,000
Office salaries expense	100,875
Rent expense: Office space	21,125
Rent expense: factory space	25,750
Rent expense: factory building	79,875
Maintenance expense: factory equipment	27,875
Sales discount	57,500
Sales salaries expense	286,250
Total operating expense	729,625

Table (1)

Hence, total operating expense is $729,625.

e.

To determine

Net income or loss before tax.

Explanation of Solution

Calculated info,

The gross profit is $3,204,250.

The total amount of operating expense is $729,625.

Formula to calculate the net income or loss before tax:

$\text{Net}\text{income}=\text{Gross}\text{profit}-\text{Operating}\text{expense}$

Substitute $3,204,250 for the gross profit and $729,625 for the operating expense,

$\begin{array}{c}\text{Net}\text{income}=\$3,204,250-\$729,625\\ =\$2,474,625\end{array}$

Hence, net income is $2,474,625.