Buy Best ACCT 346 Week 1 Homework Assignment (Question 2, 3 and 4) Summer 2020

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Buy Best ACCT 346 Week 1 Homework Assignment Question 2 3 and 4 Summer 2020

ACCT 346 Week 1 Homework Question 2

Ivanhoe Industries is calculating its Cost of Goods Manufactured at year-end. Ivanhoe’s accounting records show the following: The Raw Materials Inventory account had a beginning balance of \$13,000 and an ending balance of \$19,000. During the year, the company purchased \$57,000 of direct materials. Direct labor for the year totaled \$116,000 while manufacturing overhead amounted to \$154,000. The Work in  Process Inventory account had a beginning balance of \$24,000 and an ending balance of \$16,000. Assume that Raw Materials Inventory contains only direct materials. Compute the Cost of Goods Manufactured for the year. (Hint: The first step is to calculate the direct materials used during the year.)

The cost of goods manufactured is the manufacturer’s cost to obtain new finished goods that are ready to sell. The cost of goods manufactured summarizes the cost of activities that take place in the manufacturing plant over the period. Manufacturers buy direct materials1, which are stored in the Raw Materials Inventory until used in production. During production, direct labor2 and manufacturing overhead3 are used to convert the raw materials into finished products. During production, the raw materials, direct labor, and manufacturing overhead are moved into a Work in Process Inventory. When the goods are completed they are moved from

Work in Process Inventory into Finished Goods Inventory.

To compute the cost of goods manufactured, we will complete two steps, calculate the cost of the direct materials used during the year (step 1), and calculate the cost of goods manufactured (step 2).

Step 1: Calculate the cost of the direct materials used during the year.

Step 2: Calculate the cost of goods manufactured for the year.

1: Definition

Direct materials are primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product.

2: Definition

Direct labor is the cost of compensating employees who physically convert raw materials into the company’s products; labor costs that are directly traceable to the finished product.

3: Definition

Manufacturing overhead is all manufacturing costs other than direct materials and direct labor. Also called factory overhead and indirect manufacturing cost.

ACCT 346 Week 1 Homework Question 3

Compute the Cost of Goods Manufactured and Cost of Goods Sold for Clear Bay Company for the most recent year using the amounts described next. Assume that Raw Materials Inventory contains only direct materials. 1(Click the icon to view the data.)

The cost of goods manufactured is the manufacturer’s cost to obtain new finished goods that are ready to sell. The cost of goods manufactured summarizes the cost of activities that take place in the manufacturing plant over the period. Manufacturers buy direct materials2, which are stored in the Raw Materials Inventory until used in production. During production, direct labor3 and manufacturing overhead4 are used to convert the raw materials into finished products. During production, the raw materials, direct labor, and manufacturing overhead are moved into a Work in Process Inventory. When the goods are completed they are moved from

Work in Process Inventory into Finished Goods Inventory.

To compute the cost of goods manufactured, we will complete two steps, calculate the cost of the direct materials used during the year (step 1), and calculate the cost of goods manufactured (step 2).

Step 1: Calculate the cost of the direct materials used during the year…………

Step 2: Calculate the cost of goods manufactured for the year…………….

Step 3: Calculate the cost of goods sold………………

1: Data Table

2: Definition

Direct materials are primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product.

3: Definition

Direct labor is the cost of compensating employees who physically convert raw materials into the company’s products; labor costs that are directly traceable to the finished product.

4: Requirement (Part One)

Manufacturing overhead is all manufacturing costs other than direct materials and direct labor. Also called factory overhead and indirect manufacturing cost.

ACCT 346 Week 1 Homework Question 4

Part One: In 2015, Patricia Webber opened Patricia’s Posies, a small retail shop selling floral arrangements.

1(Click the icon to view the records.)

Part Two: Patricia’s Posies was so successful that Patricia decided to manufacture her own brand of floral supplies: Floral Sea Manufacturing. 3(Click the icon to view the records.)

Part Three: Show the ending inventories that would appear on these balance sheets:

5(Click the icon to view additional information.)

Part One:

A merchandiser’s income statements feature the Cost of Goods Sold as the major expense. The cost of Goods Sold is deducted from Sales Revenue to yield the company’s gross profit. Next, all operating expenses (all period costs) are deducted to arrive at the company’s operating income.

Before we prepare the income statement, we must calculate the cost of goods sold. In the cost of goods sold calculation, we start with the beginning inventory and add to it all of the companies’ product costs for the period: the cost of the merchandise purchased from manufacturers or distributors, freight-in, and any import duties. The resulting total reflects the cost of all goods that were available for sale during the period. Then we subtract the cost of the products still in the ending inventory to arrive at the cost of goods sold.

Begin by selecting the labels to calculate the cost of goods sold……………….

Part Two:

Requirement 1. Calculate the Cost of Goods Manufactured for Floral Sea Manufacturing for the year ended December 31, 2017.

The cost of goods manufactured is the manufacturer’s cost to obtain new finished goods that are ready to sell. The cost of goods manufactured summarizes the cost of activities that take place in the manufacturing plant

over the period. Manufacturers buy direct materials6, which are stored in the Raw Materials Inventory until used in production. During production, direct labor7 and manufacturing overhead8 are used to convert the raw materials into finished products. During production, the raw materials, direct labor, and manufacturing overhead are moved into a Work in Process Inventory. When the goods are completed they are moved from the Work in Process Inventory into the Finished Goods Inventory.

To compute the cost of goods manufactured we will complete two steps, calculate the cost of the direct materials used during the year (step 1), and calculate the cost of goods manufactured (step 2).

Step 1: Calculate the cost of the direct materials used during the year.

Step 1 simply analyzes what happened in the Raw Materials Inventory account during the year. We start with the beginning balance in the Raw Materials Inventory account and add to it all of the direct materials purchased during the year, including any freight-in and import duties. This tells us the cost of materials that were available for use during the year. Finally, by subtracting out the ending balance of Raw Materials Inventory, we are able to back into the cost of the direct materials that were used…………

Step 2 Calculate the cost of goods manufactured for the year.

Step 2 simply analyzes what happened in the Work in Process Inventory account during the year. We start with the beginning balance in Work in Process and then add to it all three manufacturing costs that were incurred during the year (Direct Materials used, Direct Labor, and Manufacturing Overhead). Finally, by subtracting out the goods still being worked on at year-end (ending Work in Process Inventory) we are able to back into the Cost of Goods Manufactured. This figure represents the cost of manufacturing the units that were completed and sent to Finished Goods Inventory during the year…………..

Requirement 2. Prepare an income statement for Floral Sea Manufacturing for the year ending December 31, 2017. Begin by calculating the cost of goods sold for the year

Step 3: Calculate the cost of goods sold.

Step 3 simply analyzes what happened in the Finished Goods Inventory account during the year. We start with the beginning balance of the Finished Goods Inventory and add to it the product that was manufactured during the year that arrived in total goods available for sale. Finally, just like a merchandiser, we subtract what was left in inventory (Finished Goods) back into the cost of goods sold. (For accounts with a \$0 balance, make sure to enter “0” in the appropriate cell.)

Requirement 3. How does the format of the income statement for Floral Sea Manufacturing differ from the income statement of Patricia’s Posies?

The income statement for a manufacturer is essentially identical to that of a merchandising company. The only real difference is that the company is selling products that it has made, rather than merchandise that it has purchased. As a result, the calculation of the Cost of Goods Sold is different. A merchandiser’s cost of goods sold is based on the cost of the merchandise it purchased whereas a manufacturer’s cost of goods sold is based on the cost of the merchandise it manufactured.

Part Three:

Requirement 1. Show the ending inventories that would appear on the balance sheet of Patricia’s Posies on December 31, 2016.

The only difference between a merchandiser and a manufacturer relates to how inventory is shown in the current asset section:

• Merchandising companies- show “inventory” or “merchandise inventory”
• Manufacturing companies- show Raw Materials, Work in Process, and Finished Goods Inventory Show the ending inventories that would appear on the balance sheet of Patricia’s Posies on December 31, 2016……………

Requirement 2. Show the ending inventories that would appear on the balance sheet of Floral Sea Manufacturing at December 31, 2017.

1: Data Table

On December 31, 2016, her accounting records show the following:

2: Requirement (Part One)

Prepare an income statement for Patricia’s Posies, a merchandiser, for the year ending December 31, 2016.

3: Data Table

At the end of December 2017, her accounting records show the following:……………

4: Requirements (Part Two)

1. Calculate the cost of goods manufactured for Floral Sea Manufacturing for the year ended December 31, 2017.
2. Prepare an income statement for Floral Sea Manufacturing for the year ending December 31, 2017.
3. How does the format of the income statement for Floral Sea Manufacturing differ from the income statement of Patricia’s Posies?

1. Patricia’s Posies on December 31, 2016
2. Floral Sea Manufacturing on December 31, 2017

6: Definition

Direct materials are primary raw materials that become a physical part of a finished product and whose costs are traceable to the finished product.

7: Definition

Direct labor is the cost of compensating employees who physically convert raw materials into the company’s products; labor costs that are directly traceable to the finished product.

8: Requirement (Part One)

Manufacturing overhead is all manufacturing costs other than direct materials and direct labor. Also called factory overhead and indirect manufacturing cost.

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