# Question & Answer: During the month, 18,500 units of product were manufactured and 10,000 units of product were sold. On March…..

GrandSlam, Inc., incurred the following costs during March:

 Selling expenses \$ 156,500 Direct labor 290,000 Interest expense 41,100 Manufacturing overhead, actual 127,700 Raw materials used 474,000 Administrative expenses 118,500

During the month, 18,500 units of product were manufactured and 10,000 units of product were sold. On March 1, GrandSlam, Inc., carried no inventories. On March 31, there were no inventories for raw materials or work in process.

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Required:

a. Calculate the cost of goods manufactured during March and the average cost per unit of product manufactured. (Round “Average cost per unit” to 2 decimal places.)

b. Calculate the cost of goods sold during March. (Round “Average cost per unit” to 2 decimal places.)

c-1. Calculate the difference between cost of goods manufactured and cost of goods sold. (Round “Average cost per unit” to 2 decimal places.)

c-2. How will this amount be reported in the financial statements?

 Finished goods inventory Raw materials inventory Work in progress inventory

d. Prepare a traditional (absorption) income statement for GrandSlam, Inc., for the month of June. Assume that sales for the month were \$1,049,000 and the company’s effective income tax rate was 40%. (Round “Average cost per unit” to 2 decimal places.)

A) CALCULATE COST OF GOODS MANUFACTURED AND AVERAGE COST PER UNIT :

 Raw material used 474000 Direct labour 290000 Manufacturing overhead 127700 Cost of goods manufactured 891700 No of units produced 18500 Average cost per unit of manufactured 48.20

B) CALCULATE COST OF GOODS SOLD :

Cost of goods sold = 10000*48.20 = \$482000

C1) Difference between cost of goods manufactured and cost of goods sold

Difference = Cost of goods manufactured-cost of goods sold

= 891700-482000

Difference = \$409700

C2) AMOUNT REPORTED IN FINANCIAL STATEMENT :

 Finished goods inventory 409700 Raw material inventory 0 Work in process inventory 0

d) PREPARE TRADITIONAL INCOME STATMENT :

 Sales 1049000 Less: Cost of goods sold (482000) Gross profit 567000 Less: Selling expenses (156500) Less: Administrative exp (118500) Earning before interest and tax 292000 Less : Interest (41100) Earning before tax 250900 Less: Tax expenses (100360) Net income 150540