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Old Monday, January 21, 2013
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Muhammad Usman 987 Muhammad Usman 987 is offline
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Requirement 1,2,3
Adil compnay
Income Statement


Sales 1,500,000
Less: Cost of Goods Sold
Direct Material-Opening 50,000
Add: Direct Material Purchased 300,000
Direct Material Available for use 350,000
Less: Direct Material-Ending (20,000)
Direct Material Used 330,000
Add: Direct Labor (30% of Conversion) 60,000
Prime cost 390,000
Add: FOH Costs (70% of Conversion) 140,000
Total Manufacturing Cost 530,000
Add: Work in Process – Opening 1,170,000
Cost of goods put in to process 1,700,000
Less: Work in Process- ending (900,000)
Cost of goods manufactured (8/15 of Sales) 800,000
Add: Finished Goods-Opening 30,000
Cost of goods available for sale 830,000
Less: Finished goods-Ending (80,000) (750,000)
Gorss Profit 750,000
Less: Operative Expenses
Administrative and General Expenses 210,000
Marketing and selling 20,000 (230,000)
Net Income 520,000


Requirement 4
Units Sold 1000
Add: Finished goods ending 60
1060
Less: Finished goods opening (25)
Units Manufactured 1035

Requirement 5:

Per unit cost of goods manufactured = 800,000 / 1035
= 772.94
Requirment 6:

G.P per unit sold = 750,000 / 1000
= 750




Working for (W-I-P inventories)

Let
W_I_P ending inv = x,
so according to question,
opening inventory will be (x+.30x) (30% more then ending)

Now difference between Cost of goods manufactured and Total factory cost is 270,000 (800,000-530,000).

So,
Opening – ending = 270,000
(x + 0.30x) – x = 270,000
1.30x – x = 270,000
0.30x = 270,000
x = 270,000/0.30
x = 900,000

So ending inventory is 900,000. Now follow the reverse process and you will get the opening inventory = 1,170,000

Now Proof of working:

(X+0.30x) - x = 270,000
1170000 – 900000 = 270,000
270,000 = 270,000


Seniors please check it out.
Zahra Raza I have given calculation of w-i-p inventories. Check it out.
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Last edited by Muhammad Usman 987; Monday, January 21, 2013 at 11:11 AM. Reason: correction
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