The following account balances and other information

are from SLINN Corporation's accountirg

records for year-end December 31, 200g. Use this information
to prepare (1) a table lisring factory
overhead costs, (2) a manufacturing statement (show
only the total factory overhead cost), and (3) an
income statement.

Advertising expense
$ 85,000 Goods in process inventory Dec.3l,2OO7
Amortization expense-patenB . . . . . t6,000
.. . . . .. $ 8,000
Goods in process inventory,Dec.3l,200g ... ....
Bad debts expense
9,000
28,000 lncome taxes
Depreciation expense-Office equipment 53100
37,000 lndirect labor
26,000
Depreciation expense-Factory building
t33,000 lnterest expense
25,000
Depreciation expense-Faeory equipment
78,000 Miscellaneous expense
s5,000
Direct labor 250,000 Property urxes on facrory equipmenr .. .. t4,oo0
Factory insurance expired
62,000 Raw materiais inventory, Dec. 31, 2OO7 . . 60,000
Factory supervision .... 74,000 Raw materials inventory, Dec. 31, 2OOg . . 78,000
Factory supplies used . .
2r,000 Raw materials purchases
3 13,000
Factory utilities
I 15,000 Repairs expense-Factory equipmenr
3 1,000
Finished goods inventory, Dec. 3 I, 2OO7 . . I5,000 Salaries expense
I 50,000
Finished goods inventory, Dec. 3 l, 200g
I2,500 Sales
t,630,000

?lr:l;rinI.:h i S:l,i ;i,;,r

e Analyze the account balances and select those
that are part of iactory overhead costs.
t
o Arrange these costs in a table that rists factory
overhead costs for the year.
t the remaining costs and select those related to production
1naI-ry? activity for the year; selected costs
should include the materials and goods in process inventories
and direct labor.
o Prepare a manufacturing^statement for the year showing
the calculation of the cost of materials used
in production, the cost of direct labor, and ih. totul factory
overhead cost. when presenting overhead
cost on this statement, report only total overhead cost
from the table of overhead costs for &e year.
show the costs of beginning and ending goods in process
inventorf to determine cost of goods
manufactured.
o organize the remaining revenue and expense
items into the income statement for the year. Combine
cost of goods manufactured from the manufacturing
statement with the finished goods inventorv
amounts to compute cost of goods sold lbr the year.

Navaroli company be-gan operations on January 5,2001 . cost

and sales information for its flrst calendar
year of operations are summarized below.

Manufacturing costs
Direct materials
$80 per unit
Direct labor
$120 per unit
Factory overhead costs for the year
Variable overhead
$ 5,000,000
Fixed overhead
$ r4,000,000
Nonmanufacturing costs
Variable selling and administrative
$ r,400,000
Fixed selling and administratiye
$ 8,000,000
Production and sales daa
Units produced 200,000 units
Units sold 140,000 units
Units in ending inventory 60,000 units
Sales price per unit
$600 per unit

Requured
fl. Prepare an income statement for the company under absoqption
costing.
2, Prepare an income statement for the company under variable cosiing.
3' Explain the source(s) of the difference in reported income under the two
costing methods.
 Company produces a product that passes through a single producrion process. Then, com-
Ltj:)l]'l'^
r'"ttru prooucts are transferred to finished goods
turing acriviries in its warehouse. Information related to its manufac-

.:, for Jull tbllows. il<

d L.J h e, edncn,pt'}
f ?\ t ut ug€* e#eqkh).+€d fu/Ur*#<_WM+

..:; _..;.; .! a::a: _,::., :.

(l v!t;uuu) I r,:,,,.:t'::!ceItag€ compleqed:Labor and overhead .

,in-cr:lir:ed.t ,;
i,:,:i:, l::: j:":.: i'l:: ;::l:. 1:]..:.,:-ti i,:.:r :.::r,j:Yil;.:':,.!=ir1|...9.]!.-1,q,!8lfo,,,.,'+r1a:"1r;i;,1:::,-,'1.;.
Ovelhead applied (200Y" of direct labori . ,;, :.. : ;." j t.:.;-::r.:::r:
l;r- ':,'i. l: ' .:r,.-:.,j1 rr --':-:: i:)

!j++= it :-vlltD:Iql,teoEnlsPerloo .:..i1.......,.. :

E--i^^,^.,;;L^-i 1 ::'- . .' 'Un;a;;Dlet6td,rhisnFrio.I , :,
Factory.ov.erh"nd...].1..Unit!conipleted.ihispeiiod....... '

lndirecr materials used

Other nva.ho'.|.^.-.

i..:;..'E

4" Prepare a report of costs accounted lor and a report of costs to account
for.

:spon Caps Co
manufacrures and selis caps for different
sporting events. The fired costs of operating rhe

;:T::i;,i';ill9;::' ::lT:::Xj:ij: "Tut't' 'o"' io' ,'" is f". unit rhe caps are sold ror
$s per ,nir. The flrecl cosis provide a production
.;;;;;';;; 'a' ,;.:;.f:#;"iTff,1:
Ra=rrirzaal eu
rrv:$rr

l. Use rhe fornuias in rhe chapter ro compure

the ibllor.ving:
a, Conrrihurion merein per cap.
b' Break-even point in ierms of the number
cf caps produce,l an,j scrcr.
c. -{mount ol nei jncone at j0,000 caps sold per
rnonth fignore txes r.
d. Amouat oi nei income ar g5,{100 caps sold pe.
monih (ignore iares).
- and sold ro provi,3e s-r5.000 or aiter-tax rncome.
il:*:i.o-]- ff:r"i:#*oduced assurirns an

$. Use rhe ibrmulas in the chapter to compure the

a, Conrrjbr_rrion margin ratio.
b. Break-even poiat in terms of sales dcr11ars.
e, Anount of ner income at S2j0,000 oisales pe;: monih iignore ta.<e,r).
;1. Amr-runr'ri ner inccine at s60c.cc0 cr'sales per
ieonrh iignore r"l:res).
e. Doilars oii sales nee,led io plovldE 5+5.000 oi:iirer-ia.t i.ncr,.ne.
assuung an inc,rme ta.i rar. ci25%.