Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 59

Cost of Goods Manufactured; Income Statement

Consider the following information for Blue Water Equipment, Inc., a manufacturer of sailboat rigging, blocks, and cordage.

Advertising expenses	$111,000
Depreciation expense—admin. office	88,000
Depreciation expense—plant and equip.	299,000
Depreciation expense—delivery trucks	55,000
Direct materials inventory, beginning	22,000
Direct materials inventory, ending	16,000
Direct materials purchases	348,000
Direct labor	455,000
Indirect labor	329,000
Finished goods inventory, beginning	66,000
Finished goods inventory, ending	42,000
Insurance on plant	44,000
Heat and light for plant	23,000
Repairs on plant building	34,000
Supervisor’s salary—plant	85,000
Supplies—plant	118,000
Supplies—administrative office	42,000
Work-in-process inventory, beginning	14,000
Work-in-process inventory, ending	11,000
Sales representatives’ salaries	216,000
Sales revenue	2,312,000

Required Prepare a statement of cost of goods manufactured and an income statement for Blue Water Equipment, Inc. for the year ended December 31, 2010.

Step 1 of 2

Direct costs are those costs which can be clearly related to certain good or activity. Indirect costs are those costs which cannot be clearly related to certain good or activity. Cost is expense of resource which happens when the resource is used.