Communicating in Practice (continued) 3. Before an income statement can be prepared, the cost of the 8,000 phones in the ending finished goods inventory must be determined. Altogether, the company produced 40,000 phones during the quarter; thus, the production cost per phone would be:
Cost of goods manufactured $1,014,000 = = $25.35 per unit Phones produced during the quarter 40,000 units Since 8,000 phones (40,000 – 32,000 = 8,000) were in the finished goods inventory at the end of the quarter, the total cost of this inventory would be: 8,000 phones × $25.35 per phone = $202,800. With this figure and other data from the case, the company’s income statement for the quarter can be prepared as follows: SUN POWER COMMUNUCATIONS, INC. Income Statement For the Quarter Ended March 31 Sales (32,000 phones) ............................................ Less cost of goods sold: Finished goods inventory, beginning ..................... Add: Cost of goods manufactured ........................ Goods available for sale ....................................... Deduct: Finished goods inventory, ending ............. Gross margin.......................................................... Less operating expenses: Selling and administrative salaries ........................ Advertising .......................................................... Rental cost, facilities (20% × $95,000) ................. Depreciation, office equipment ............................. Utilities (10% × $100,000)................................... Travel, salespersons ............................................ Net income.............................................................
Solutions Manual, Chapter 2 42
$1,280,000 $ –0– 1,014,000 1,014,000 202,800
150,000 90,000 19,000 47,000 10,000 40,000
811,200 468,800
356,000 $ 112,800
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Introduction to Managerial Accounting, Fourth Canadian Edition