1 Prepare a schedule of cost of goods manufactured for the q

Always show your work when doing fun& exciting exercises! Question 1) Staci Morales, founder and president of Medical Technology, Inc. is concerned about her company. Given the demand for their heart monitors, she was certain that the company would be profitable immediately Instead, she saw nothing but a gusher of red ink for the first quarter. \"At this rate we\'ll be out of business in a year,\" she replied. The data to which Staci was referring are shown below: Medical Technology, Inc. Income Statement For the Quarter Ended June 30, 2018 Sales (16,000 monitors) Less operating expenses S 995,000 Selling and administrative salaries Advertising Cleaning supplies, factory Indirect labor cost Depreciation, office equipment Direct labor costs Raw materials purchased Maintenance, factory Rental cost, facilities Insurance, factory Utilities s 90,000 200,000 6,000 135,000 18,000 80,000 310,000 47.000 65,000 9,000 40,000 75,000 Travel, salespersons $1.135 000 S (140.000) 60 Net operating loss Medical Technology was organized on April 1 of the current year to produce and market a revolutionary rt monitor. The company\'s accounting system was set up by Staci\'s brother-in-law who had taken an new hea accounting course about 10 years ago. We may not last a year if the insurance company doesn\'t pay the $227.000 it owes us for the 4,00 monitors lost in the truck accident last week,\" said Staci. \"The agent says our claim is inflated, but that\'s a lot of baloney Just after the end of the quarter, a truck carrying 4,000 monitors wrecked and burned, destroy ing the entire load. The monitors were part of the 20,000 units completed during the quarter ended June 30. They wer in a warehouse awaiting sale at quarter-end and were sold and shipped on July 3 (this sale is not included on the income statement above). The trucking company\'s insurer is liable for the cost of the goods lost. Staci\'s brother-in-law determined the $227,000 by taking the total costs for the quarter divided by the monitors produced during the quarter and multiplying it by the units destroyed. The following additional information is available on the company\'s activities during the quarter ended Inventory at the beginning and end of the quarter were as follows: June 30: a. End of the Quarter S 30,000 S 40,000 Beginning of the Quarter Raw materials 0 Work in process 0 Finished goods 0 Sixty percent of the rental cost for facilities and 80% of the utilities cost relate to manufacturing operations. The remaining amounts relate to selling and administrative activities. b.

Solution

1 Schedule of cost of goods manufactured Direct materials used: Beginning Raw materials inventory 0 Add: raw materials purchased 310000 Total raw materials available 310000 Less:Ending Raw materials inventory 30000 Total raw materials used 280000 Direct labor 80000 Manufacturing overhead Cleaning supplies-Factiry 6000 Indirect labor cost 135000 Maintenance-Factory 47000 Rental cost -Facilities (65000*60%) 39000 Insurance-Factory 9000 Utilities (40000*80%) 32000 Depreciation-Production equipment 75000 343000 Total manufacturing costs 703000 Add: Beginning work in process 0 703000 Less: Ending work in process 40000 Cost of goods manufactured 663000 2 Corrected income statement Sales 995000 Less: Cost of goods sold Beginning finished goods inventory 0 Cost of goods manufactured 663000 Total goods available for sale 663000 Less: Ending finished goods inventory (Note:1) 132600 530400 Gross profit 464600 Less: Operating expenses Selling and administrative salaries 90000 Advertising 200000 Depreciation-Office equipment 18000 Rental cost -Facilities (65000*40%) 26000 Utilities (40000*20%) 8000 Travel, Sales persons 60000 402000 Net income 62600 3 Units of monitors lost=4000 units Cost of goods manufactured per unit=$663000/20000=$ 33.15 Amount due from insurance company=4000*33.15=$ 132600 Monitors should be valued at manufacturing cost (No need to consider selling and administrative expenses) Note:1 Cost of goods manufactured=$663000 Units produced =20000 units Cost of goods manufactured per unit=$663000/20000=$ 33.15 Units sold=16000 units Ending finished goods inventory=20000-16000=4000 units Cost of Ending finished goods inventory=4000*33.15=132600