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Problem 16.2A

An Introduction to Product Costs

River Queen Corporation began operations early in the current year, building luxury boats.  During the year, the company started and completed 40 boats at a cost of $80,000 per unit.  Of these, 30 were sold for $130,000 each and ten remain in finished goods inventory.  In addition, the company had five partially completed units in its factory at year-end.  Total costs for the year (summarized alphabetically) were as follows:

Direct materials used$   800,000

Direct labor applied to production1,000,000

Income taxes expense80,000

General and administrative expenses600,000

Manufacturing overhead2,000,000

Selling expenses400,000

Instructions

Compute the following for the current year:

a.

Total manufacturing costs charged to work in process during the period.

b.

Cost of finished goods manufactured.

c.

Cost of goods sold.

d.

Gross profit on sales.

e.

Ending inventories of (1) work in process and (2) finished goods.

16-2Alternate Problems for use with Financial and Managerial Accounting, 12e

© The McGraw-Hill Companies, 2002

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