Cost of goods manufactured, cost of goods sold, and income statement
Response to the following problem:
Richards, Inc., incurred the following costs during May:
Raw materials used $ 662,000
Direct labor 1,304,000
Manufacturing overhead, actual 896,000
Selling expenses 534,000
Administrative expenses 388,000
Interest expense 182,000
Required:
During the month, 59,625 units of product were manufactured and 54,000 units of product were sold. On May 1, Richards, Inc., carried no inventories. On May 31, there were no inventories other than finished goods.
a. Calculate the cost of goods manufactured during May and the average cost per unit of product manufactured.
b. Calculate the cost of goods sold during May.
c. Calculate the difference between cost of goods manufactured and cost of goods sold. How will this amount be reported in the financial statements?
d. (Optional) Prepare a traditional (absorption) income statement for Richards, Inc., for the month of May. Assume that sales for the month were $4,896,000 and the company's effective income tax rate was 35%.