2010 05 05 - 213856 - P19 5a

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. 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 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. Complete the schedule of cost of goods manufactured for
October 2010. (List amounts from largest to smallest eg 10, 5, 3, 2.) TOMBERT
COMPANY Cost of Goods Manufactured Schedule For the Month Ended October 30,
2010 Factory utilitiesWork in process, October 1Finished goods inventory, October
31Sales (net)Raw materials inventory, October 31Direct materials usedWork in process,
October 31Factory insuranceSelling and Administrative salariesFi
(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%

2010 05 05 - 213856 - P19 5a

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P19-5A Tombert Company is a manufacturer of computers.

Its controller resigned in

(a) TOMBERT COMPANY

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

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

(b) TOMBERT COMPANY

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

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