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PROBLEM 2–21 Schedule of Cost of Goods Manufactured; Income Statement; Cost Behavior [ LO2 , LO3 , LO4 , LO5 , LO6 ] Selected account balances for the year ended December 31 are provided below for Superior Company: Selling and administrative salaries . . . . . . . . . . . . Purchases of raw materials . . . . . . . . . . . . . . . . . . Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Advertising expense . . . . . . . . . . . . . . . . . . . . . . . Manufacturing overhead . . . . . . . . . . . . . . . . . . . . Sales commissions . . . . . . . . . . . . . . . . . . . . . . . . $110,000 $290,000 ? $80,000 $270,000 $50,000 Inventory balances at the beginning and end of the year were as follows: Beginning of the Year Raw materials . . . . . . . . . . . . . . Work in process . . . . . . . . . . . . . End of the Year $40,000 ? Finished goods . . . . . . . . . . . . . $50,000 $10,000 $35,000 ? The total manufacturing costs for the year were $683,000; the goods available for sale totaled $740,000; and the cost of goods sold totaled $660,000. Required: 1. 2. 3. 4. Prepare a schedule of cost of goods manufactured and the cost of goods sold section of the company’s income statement for the year. Assume that the dollar amounts given above are for the equivalent of 40,000 units produced during the year. Compute the average cost per unit for direct materials used and the average cost per unit for manufacturing overhead. Assume that in the following year the company expects to produce 50,000 units and manufacturing overhead is fi xed. What average cost per unit and total cost would you expect to be incurred for direct materials? For manufacturing overhead? (Assume that direct materials is a variable cost.) As the manager in charge of production costs, explain to the president the reason for any difference in average cost per unit between (2) and (3) above.
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