5. Award: 10.

00 points

The following details are from the accounting records of Gulf Shore Limited for the year ended April 30:

Costs incurred:
Direct labour $ 70,000
Raw material purchases 118,000
Indirect labour 30,000
Maintenance, factory equipment 6,000
Advertising expense 90,000
Insurance, factory equipment 800
Sales staff salaries 50,000
Rent, factory facilities 20,000
Supplies, factory 4,200
Depreciation, office equipment 3,000
Depreciation, factory equipment 19,000

Beginning End of
of Year Year
Inventories:
Raw materials $ 7,000 $15,000
Work in process 10,000 5,000
Finished goods 20,000 35,000

Required:
1. Prepare a schedule of cost of goods manufactured for the year ended April 30.

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 GULF SHORE LIMITED
Schedule of Cost of Goods Manufactured
For the year ended April 30
Direct materials:
Raw materials inventory, beginning $ 7,000
Add: Purchases of raw materials 118,000
Raw materials available for use 125,000
Deduct: Raw materials inventory, ending 15,000
Raw materials used in production $ 110,000
Direct labour 70,000
Manufacturing overhead:
Indirect labour $ 30,000
Maintenance, factory equipment 6,000
Insurance, factory equipment 800
Rent, factory facilities 20,000
Supplies, factory 4,200
Depreciation, factory equipment 19,000

Total manufacturing overhead costs 80,000

Total manufacturing costs 260,000
Add: Work in process, beginning 10,000
270,000
Deduct: Work in process, ending 5,000
Cost of goods manufactured $ 265,000

2. Prepare the cost of goods sold section of Gulf Shore Limited’s income statement for the year ended April 30.

Finished goods inventory, beginning $ 20,000

Add: Cost of goods manufactured 265,000
Goods available for sale 285,000
Deduct: Finished goods inventory, ending 35,000
Cost of goods sold $ 250,000

3. Why does the cost of goods manufactured differ from cost of goods sold?

Cost of goods manufactured are the production costs incurred of finished goods produced in a specific accounting period while to
get cost of goods sold finished goods inventory at the beginning are included and finished goods inventory at the end are excluded
in a specific accounting period.

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 References

Worksheet Learning Objective: 02-

03 Prepare an income
statement, including the
calculation of cost of
goods sold.

Learning Learning Objective: 02-

Objective: 02-01 04 Prepare a schedule
Identify each of of cost of goods
the three basic manufactured.
manufacturing
cost categories.

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