StorSmart Company makes plastic organizing bins. The company has the following inventory balances at the beginning and end of March:

Beginning Inventory Ending Inventory
Raw materials $ 33,000 $ 22,000
Work in process 25,000 44,000
Finished goods 60,000 58,000

Additional information for the month of March follows:

Raw materials purchases $ 84,000
Indirect materials used 10,000
Direct labor 55,000
Manufacturing overhead applied 85,000
Selling, general, and administrative expenses 58,000
Sales revenue 450,000

Required:
1. Based on the above information, prepare a cost of goods manufactured report.
2. Based on the above information, prepare an income statement for the month of March

a. Statement of cost of goods manufactured

Opening Raw materials                                                       $ 33,000

Add: Raw materials purchased                                           $ 84,000

Less: Closing Raw Materials                                               $(22,000)

Total Raw Materials consumed                                          $ 95,000

Add: Direct Labour                                                              $ 55,000

Add: Indirect Materials                                                        $ 10,000

Add: Manufacturing overhead applied                              $ 85,000    

Total manufacturing costs input                                         $ 245,000

Add: Opening work in process                                           $   25,000

Less: Closing work in process                                            $ ( 44,000)

Cost of goods manufactured                                           $ 226,000

b.  Income statement

Sales                                                                                     $ 450,000

Less: Cost of goods sold                                                     $ 228,000

Gross Profit                                                                           $ 222,000

Less: Selling, general and administrative expenses         $ (  58,000)

Net Income                                                                           $ 164,000                                                                                      

Explanation:

For determining the cost of goods manufactured, we need to consider the inputs and adjust it for the opening and closing balances of Raw Materials and work in process.

Opening Raw materials                                                       $ 33,000

Add: Raw materials purchased                                           $ 84,000

Less: Closing Raw Materials                                               $(22,000)

Total Raw Materials consumed                                          $ 95,000

Add: Direct Labour                                                              $ 55,000

Add: Indirect Materials                                                        $ 10,000

Add: Manufacturing overhead applied                              $ 85,000    

Total manufacturing costs input                                         $ 245,000

Add: Opening work in process                                           $   25,000

Less: Closing work in process                                            $ ( 44,000)

Cost of goods manufactured                                           $ 226,000

For determining the income statement, we need the  the cost of goods sold, to compute that we adjust  the difference in opening and closing finished goods

Add: Opening inventory: Finished Goods                         $   60,000  

Less: Closing Inventory: Finished Goods                          $ (  58,000)

Total cost of goods sold                                                     $ 228,000

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