The following data pertain to Babor Company for the fiscal year ended December 31: Prior December 31 Current December 31 Purchases of materials $ 197,500 Direct labor 130,250 Indirect labor 51,500 Factory insurance 9,300 Depreciation-factory 36,250 Repairs and maintenance-factory 14,900 Marketing expenses 148,550 General and administrative expenses 87,950 Materials inventory $ 29,500 64,750 Work-in-Process inventory 16,250 18,600 Finished Goods inventory 18,300 24,400 Sales in the current year were $660,000. Required: Prepare a schedule of cost of goods manufactured and an income statement for the current year for Babor Company.

Answer and Explanation:

The preparation is presented below:

Babor Company

Cost of Goods Sold Statement

For the fiscal year ended December 31

Beginning work-in-process inventory $16,250

Manufacturing costs:

Direct materials:

Beginning inventory $29,500

Purchases $197,500

Materials available $227,000

Less: Ending inventory - $64,750

Direct materials used $162,250

Direct labor $130,250

Other manufacturing costs

Indirect labor $51,500

Factory insurance $9,300

Depreciation - factory $36,250

Repairs and maintenance - factory $14,900

Total of other manufacturing cost $111,950

Total manufacturing costs: $404,450

Total costs of work-in-process $420,700

Less: Ending work-in-process - $18,600

Cost of goods manufactured $402,100

Beginning finished goods inventory $18,300

Finished goods available for sale $402,400

Less: Ending finished goods inventory - $24,400

Cost of goods sold $396,000

Babor Company

Cost of Goods Sold Statement

For the fiscal year ended December 31

Sales $660,000

Less: Cost of goods sold - $396,000

Gross profit $264,000

Less: Marketing expenses - $148,550

Less: General and administrative expenses - $87,950

Net operating income $27,500