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Valenko Company

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Schedule of Cost of goods manufactured: Income Statement; Cost Behavior
The following selected account balances for the year ended Dec 31 are provided for Valenko Company:
Advertising expense........................$215,000
Insurance, Factory equipment..........$8,000
Depreciation, Sales Equipment........$40,000
Rent, Factory building........................$90,000
Utilities, Factory..................................$52,000
Sales Commissions.............................$35,000
Cleaning Supplies, factory.................$6,000
Depreciation, Factory Equipment.....$110,000
Selling and Administrative salaries....$85,000
Maintenance, factory...........................$74,000
Direct Labor............................................$ ?
Purchase of Raw Materials.................$260,000
Inventory balances at the beginning and end of the year are as follows:
Beginning of the year End of year
Raw materials $50,000 $40,000
Work in process ? $33,000
Finished goods $30,000 ?

The total manufacturing costs for the year were $675,000; the goods available for sale totaled $720,000; and the cost of goods sold totaled $635,000.
Required:
1. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company's income statement for the year.
2. Assume that the dollar amounts given above are for the equivalent of 30,000 units produced during the year. Compute the average cost per unit for direct materials used, and compute the average cost per unit for rent on the factory building.
3. Assume that In the following year, the company expects to produce 50,000 units. What average cost per unit and total cost would you expect to be incurred for direct materials? For rent on the factory building? (Assume that the direct materials is a variable cost and that the rent is a fixed cost.)
4. As the manager in charge of production costs, explain to the president the reason for any difference in the average costs per unit between (2) and (3) above.

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Schedule of Cost of goods manufactured: Income Statement; Cost Behavior
The following selected account balances for the year ended Dec 31 are provided for Valenko Company:
Advertising expense........................ $215,000
Insurance, Factory equipment.......... $8,000
Depreciation, Sales Equipment........ $40,000
Rent, Factory building........................ $90,000
Utilities, Factory.................................. $52,000
Sales Commissions............................. $35,000
Cleaning Supplies, factory................. $6,000
Depreciation, Factory Equipment..... $110,000
Selling and Administrative salaries.... $85,000
Maintenance, factory........................... $74,000
Direct Labor............................................ $65,000
Purchase of Raw Materials................. $260,000
Inventory balances at the beginning and end of the year are as follows:
Beginning of the year End of year
Raw materials $50,000 $40,000
Work in process ?48,000 $33,000
Finished goods $30,000 $85,000

The total manufacturing costs for the year were $675,000; ...

Solution Summary

This solution is comprised of a detailed explanation to prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company's income statement for the year.

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