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BUSI3008 Assignment 1 Winter 2022

The document provides financial information for Chaos Manufacturing for the year ended December 31, 2021 including beginning and ending inventory balances, budgeted and actual costs, notes on raw materials, labor, building rent, utilities, and shipping, and other information on direct labor hours and sales. The assignment requires showing T-accounts for inventory and manufacturing overhead, preparing an income statement including a schedule for cost of goods manufactured and cost of goods sold, and explaining options to allocate under/over applied overhead and identifying the chosen option.

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18 views

BUSI3008 Assignment 1 Winter 2022

The document provides financial information for Chaos Manufacturing for the year ended December 31, 2021 including beginning and ending inventory balances, budgeted and actual costs, notes on raw materials, labor, building rent, utilities, and shipping, and other information on direct labor hours and sales. The assignment requires showing T-accounts for inventory and manufacturing overhead, preparing an income statement including a schedule for cost of goods manufactured and cost of goods sold, and explaining options to allocate under/over applied overhead and identifying the chosen option.

Uploaded by

akashtanotra3
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BUSI-3008

Assignment 1 – Cost of Goods Manufactured and Cost of Goods Sold

Due date: 11:59pm Tuesday January 18

Chaos Manufacturing had the following financial information for the year ended
December 31 2021:

Inventory Balances: Beginning Ending


Work in Progress $ 90,000 $ 50,000
Finished Goods $ 57,000 $ 75,000
Raw Materials $ 10,000 $ 20,000

During the year, the budgeted and actual costs were as follows:
Note Budget Actual
Raw Materials 1 200,000 See note1
Labour 2 440,000 418,000
Depreciation Factory Equipment 72,000 72,000
Depreciation Office Equipment 24,000 24,000
Building Rent 3 100,000 100,000
Maintenance – Factory Equipment 64,000 40,000
Utilities – Electrical 4 200,000 180,000
Sales Commissions 40,000 40,000
Advertising 25,000 25,000
Shipping 5 20,000 17,000

Other information Budget Actual


Direct Labour Hours 20,000 17,000

Sales for the year were $1,500,000

Note 1 – Raw material


Budget: 90% of raw materials are traced directly to specific jobs, and the remaining 10%
of raw materials are related to production but are untraceable to specific jobs

Actual: during the year $20,000 worth of materials were untraceable, and the rest were
directly traced and applied to WIP.

During the year $200,000 of raw materials were purchased


Note 2 – Labour

Budget:
Direct Labour $200,000 + Factory Salaries $80,000 + Sales and Marketing Salaries
$160,000 = $440,000

Actual:
Direct Labour $170,000 + Factory Salaries $85,000 + Sales and Marketing Salaries
$163,000 = $418,000

Note 3 – Building Rent


The building is all for the manufacturing facility

Note 4 – Utilities Electrical


For both budget and actual costs, 80% of these costs are related to the factory, and 20% of
these costs are related to the administrative office.

Note 5 – Shipping
Budget: 20% of budgeted shipping costs were for the delivery of raw materials to the
manufacturing facility, and the remaining 80% of the shipping costs are for the delivery of
finished goods to customers.

Actual: All of the shipping costs were for the delivery of finished goods to customer.

Note 6 – Overhead
The manufacturer uses Normal Costing. Overhead is allocated based on Direct Labour
costs.

The company is unsure how to treat under/over applied overhead.

Required:

Show T-accounts for the Inventory Accounts (Raw Materials, WIP, Finished Goods)
and for Manufacturing Overhead.

Prepare an income statement. You may include a schedule of Cost of Goods


Manufactured and Cost of Goods Sold as part of the Income Statement or as separate
schedules.

Explain which options the company can use to allocate any under/over applied
overhead. Identify which option you chose and why it was chosen.

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