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Managerial Accounting and Ratio Computation

The following calendar year-end information is taken from December 31,2011, the adjusted trial balance and other records of Plaza company.

Advertising expense 30,750
Depreciation expense-Office equipment 9,250
Depreciation expense-Selling equipment 10,600
Depreciation expense-factory equipment 35,550
Factory supervision 104,600
Factory supplies used 9,350
Factory utilities 35,000

Raw materials, December 31, 2010------------168,850
Raw materials, December 31, 2011-------------184,000
Goods in process, December 31, 2010-----------17,700
Goods in process, December 31, 2011-------------21,380
Finished goods, December 31, 2010---------------169,350
Finished goods, December 31, 2011---------------138,490
Direct labor------------------------------------------------677,480
Income taxes expense-----------------------------------235,725
Indirect labor------------------------------------------------58,875
Miscellaneous production costs------------------------10,425
Office salaries expense-------------------------------------65,000
Raw materials purchases----------------------------------927,000
Rent expense-Office space---------------------------------24,000
Rent expense-selling space---------------------------------28,100
Rent expense-Factory equipment------------------------78,800
Maintenance expense-factory equipment------------37,400
Sales discounts-------------------------------------------------64,500
Sales salaries expense--------------------------------------394,560

(1) Prepare the company's 2011 manufacturing statement.
(2) Prepare the company's 2011 income statement that reports separate categories for (a) selling expenses and (b) general and administrative expenses.
(3) Compute the (a) inventory turnover, defined as cost of goods sold divided by average inventory and (b) day's sales in inventory, defined as 365 times ending inventory divided by cost of goods sold, for both its raw materials inventory and its finished goods inventory. (To compute turnover and days' sales in inventory for raw materials, use raw materials used rather than cost of goods sold.) Discuss some possible reasons for the differences between these ratios for the two types of inventories. Round answers to one decimal place.

Solution Preview

Full solutions are provided in a separate Excel file attached. It covers a complete comprehensive Manufacturing Statement, Income Statement and the related ratios. The necessary comments are also provided to answer the last part of your question.

1) This statement is in the attached file.
2) This statement is in the attached file.
3) Computation of Ratios:

A. Inventory Turnover = Cost of Goods Sold/Average ...

Solution Summary

The solution discusses managerial accounting and ratio computation.