Reference no: EM131135000

Question 1: Manufacturing income statement, statement of cost of goods manufactured

Several items are omitted from each of the following income statement and cost of goods manufactured statement data for the month of December 2012:

	Tom Company	Jerry Company
Materials inventory, December 1	$187,200	$118,000
Materials inventory, December 31	(a)	120,000
Materials purchased	475,200	228,000
Cost of direct materials used in production	501,600	(a)
Direct labor	705,600	(b)
Factory overhead	218,400	120,000
Total manufacturing costs incurred during December	(b)	690,000
Total manufacturing costs	1,785,600	985,000
Work in process inventory, December 1	360,000	295,000
Work in process inventory, December 31	302,400	(c)
Cost of goods manufactured	(c)	683,000
Finished goods inventory, December 1	316,800	136,000
Finished goods inventory, December 31	331,200	(d)
Sales	2,760,000	1,117,000
Cost of goods sold	(d)	701,000
Gross profit	(e)	(e)
Operating expenses	360,000	(f)
Net income	(f)	256,000

Instructions

1. Determine the amounts of the missing items, identifying them by letter.

2. Prepare a statement of cost of goods manufactured for Jerry Company.

3. Prepare an income statement for Jerry Company.

Question 2: Contribution margin, break-even sales, cost-volume-profit chart, hia safety, and operating leverage

Blythe Industries Inc. expects to maintain the same inventories at the end of 2012 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during 2012.

A summary report of these estimates is as follows:

	Estimated Fixed Cost	Estimated Variable Cost (per unit sold)
Production costs: Direct materials...................................... Direct labor ...........................................		$30 20
Factory overhead...................................	$340,000	11
Selling expenses:
Sales salaries and commissions...............	80,000	5
Advertising............................................	32,000
Travel ..................................................	8,000
Miscellaneous selling expense..................	7,600	5
Administrative expenses:
Office and officers' salaries .....................	120,000
Supplies.................................................	8,000	2
Miscellaneous administrative expense.......	4,400	2
Total ....................................................	$5600 000	575

It is expected that 8,000 units will be sold at a price of $200 a unit. Maximum sales within the relevant range are 9,000 unit

Instructions:

1. Prepare an estimated income statement for 2012

2. What is the expected contribution margin ratio?

3. Determine the break even sales in units & dollars

4. Construct a cost-volume profit chart indicating the break even sales

5. What is the expected margin of safety in dollars and as a percentage of sales?

6. Determine the operating leverage