• Purchased $320,000 of materials.
• Used $275,000 of direct materials in production.
• Incurred $236,250 of direct labor wages.
• Applied factory overhead at a rate of 80% of direct labor cost.
• Transferred $670,000 of work in process to finished goods.
• Sold goods with a cost of $635,000.
• Sold goods for $1,125,000.
• Incurred $275,000 of selling expenses.
• Incurred $100,000 of administrative expenses.
a. Prepare the April income statement for Kirchhoff. Assume that Kirchhoff uses the perpetual inventory method.
b. Determine the inventory balances at the end of the first month of operations.
Answer:
a.
KIRCHHOFF INC.
Income Statement
For the Month Ended April 30, 2014
Revenues $1,125,000
Cost of goods sold 635,000
Gross profit $ 490,000
Selling expenses $275,000
Administrative expenses 100,000 375,000
Income from operations $ 115,000
b. Materials inventory:
Purchased materials…………………………………………………………… $320,000
Less: Materials used in production………………………………………… 275,000
Materials inventory, April 30………………………………………………… $ 45,000
Work in process inventory:
Materials used in production………………………………………………… $275,000
Direct labor……………………………………………………………………...… 236,250
Factory overhead (80% × $236,250)………………………………………… 189,000
Additions to work in process………………………………………………… $700,250
Less: Transferred to finished goods………………………………………… 670,000
Work in process inventory, April 30………………………………………… $ 30,250
Finished goods inventory:
Transferred to finished goods………………………………………………… $670,000
Less: Cost of goods sold……………………………………………………… 635,000
Finished goods inventory, April 30…………………………………………… $ 35,000