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Mohsen Assignment Accounting

The assistant accountant's income statement for Tombert Company in October 2010 was inaccurate. After reviewing additional information, the following corrections were made: 1. A schedule of cost of goods manufactured was prepared showing a cost of $572,200. 2. A corrected income statement reported cost of goods sold of $554,200 and net income of $9,000. Utilities and insurance expenses were allocated between factory operations and selling/administrative activities based on percentage splits provided.

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198 views

Mohsen Assignment Accounting

The assistant accountant's income statement for Tombert Company in October 2010 was inaccurate. After reviewing additional information, the following corrections were made: 1. A schedule of cost of goods manufactured was prepared showing a cost of $572,200. 2. A corrected income statement reported cost of goods sold of $554,200 and net income of $9,000. Utilities and insurance expenses were allocated between factory operations and selling/administrative activities based on percentage splits provided.

Uploaded by

abdulmut
Copyright
© Attribution Non-Commercial (BY-NC)
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Download as DOCX, PDF, TXT or read online on Scribd
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COSTS AND MANAGEMENT ACCOUNTING

(GCM 5123)

PROF DR. MOHAMED ALI ABDUL HAMID

Assignment 1

MOHSEN ALI SALEH

Student ID: 01904001


P19-5A Tombert Company is a manufacturer of computers. Its controller resigned in October
2010. An inexperienced assistant accountant has prepared the following income statement for
the month of October 2010.

TOMBERT COMPANY
Income Statement For the Month Ended October 31, 2010

Sales (net) $780,000


Less: Operating expenses
Raw materials purchases $264,000
Direct labor cost 190,000
Advertising expense 90,000
Selling and administrative salaries 75,000
Rent on factory facilities 60,000
Depreciation on sales equipment 45,000
Depreciation on factory equipment 31,000
Indirect labor cost 28,000
Utilities expense 12,000
Insurance expense 8,000 803,000

Net loss $(23,000)

Prior to October 2010 the company had been profitable every month. The company's president
is concerned about the accuracy of the income statement. As his friend, you have been asked
to review the income statement and make necessary corrections. After examining other
manufacturing cost data, you have acquired additional information as follows.

1. Inventory balances at the beginning and end of October were:

October 1 October 31

Raw materials $18,000 $34,000


Work in process 16,000 14,000
Finished goods 30,000 48,000

2. Only 70% of the utilities expense and 60% of the insurance expense apply to factory
operations. The remaining amounts should be charged to selling and administrative
activities.

a. Prepare a schedule of cost of goods manufactured for October 2010


b. Prepare a correct income statement for October 2010
(a) TOMBERT COMPANY
Cost of Goods Manufactured Schedule
For the Month Ended October 31, 2010

Work in process, October 1............................. $ 16,000


Direct materials
Raw materials inventory,
  October 1.............................................. $ 18,000
Raw materials
  purchases............................................... 264,000
Total raw materials available
  for use.................................................... 282,000
Less: Raw materials inventory,
October 31....................................  34,000
Direct materials used................................ $248,000
Direct labor..........................................................  190,000
Manufacturing overhead
Factory facility rent...................................  60,000
Depreciation on factory
  equipment..............................................  31,000
Indirect labor.............................................  28,000
Factory utilities*........................................   8,400
Factory insurance**................................... 4,800
Total manufacturing
  overhead.......................................  132,200
Total manufacturing costs.................................  570,200
Total cost of work in process............................  586,200
Less: Work in process, October 31......................   14,000
Cost of goods manufactured............................. $572,200

**$12,000 X 70% = $8,400


**$8,000 X 60% = $4,800
(b) TOMBERT COMPANY
Income Statement
For the Month Ended October 31, 2010

Sales (net) .............................................................................. $780,000


Cost of goods sold
Finished goods inventory, October 1.......................... $ 30,000
Cost of goods manufactured.......................................  572,200
Cost of goods available for sale..................................  602,200
Less: Finished goods inventory,
October 31......................................................   48,000
Cost of goods sold..............................................  554,200
Gross profit............................................................................  225,800
Operating expenses
Advertising expense.....................................................   90,000
Selling and administrative salaries.............................   75,000
Depreciation expense—sales
  equipment..................................................................   45,000
Utilities expense*..........................................................    3,600
Insurance expense**.....................................................    3,200
Total operating expenses...................................  216,800
Net income.............................................................................. $  9,000

*$12,000 X 30%

**$8,000 X 40%

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