The HOW and WHY of Preparing the Statement of Cost ofGoods Sold
Information:
Carreker Company manufactures cell phones. For next year, Carreker predictsthat 30,000 units will be produced with the following total costs:
|
Direct materials
|
$154,300
|
|
Direct labor
|
90,000
|
|
Direct labor
|
30,000
|
|
Fixed overhead
|
450000
|
Carreker expects to purchase $147,900 of direct materials next year. Projectedbeginning and ending inventories for direct materials and work in process areas follows:
|
Direct Materials Inventory
|
Work-in-Process Inventory
|
|
Beginning
|
$53,400
|
$75,000
|
|
Ending
|
47,000
|
60,000
|
Carreker Company expects to sell 34,000 units. Beginning inventory of finishedgoods is expected to be $151,000, and ending inventory of finished goods isexpected to be $45,000.
Why:
The primary use for the statement of cost of goods sold is for external financialreporting. It is a crucial input to the income statement.
Required:
1. Prepare a statement of cost of goods sold in good form.
2. What if only 32,000 cell phones were to be sold next year? Explain whichlines of the statement of cost of goods sold would be affected and how.