Perth Production Company Manufactured 100 000 Units in 2018 and Reported

question 226

Essay

Perth Production Company manufactured 100 000 units in 2018 and reported the following costs:
$\begin{array}{lrlr}\text { Sandpaper } & \$ 32000 & \text { Leasing costs-plant } & \$ 384000 \\\text { Materials handling } & 320000 & \text { Depreciation-equipment } & 224000 \\\text { Coolants \& lubricants } & 22400 & \text { Property taxes-equipment } & 32000 \\\text { Indirect manufacturing labour } & 275200 & \text { Fire insurance-equipment } & 16000 \\\text { Direct manufacturing labour } & 2176000 & \text { Direct material purchases } & 3136000 \\\text { Direct materials, } 1 / 1 / 18 & 384000 & \text { Direct materials, } 12 / 31 / 18 & 275200 \\\text { Finished goods, } 1 / 1 / 18 & 672000 & \text { Sales reventue } & 12800000 \\\text { Finished goods, } 12 / 31 / 18 & 1280000 & \text { Sales commissions } & 640000 \\\text { Work-in-process, } 1 / 1 / 18 & 96000 & \text { Sales salaries } & 576000 \\\text { Work-in-process, } 12 / 31 / 18 & 64000 & \text { Advertising costs } & 480000 \\& & \text { Administration costs } & 800000\end{array}$
Required:
a.What is the amount of direct materials used during 2018?
b.What manufacturing costs were added to WIP during 2018?
c.What is cost of goods manufactured for 2018?
d.What is cost of goods sold for 2018?
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Definitions:

Successful-efforts Method

An accounting method used in the energy industry for recognizing and capitalizing only those expenses associated with successfully locating new oil or natural gas reserves.

Full-cost Method

A method of accounting for all expenditures associated with the exploration and development of oil and gas reserves as capitalized costs, which are then amortized over the total volume of proven resources.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board that is globally accepted for financial reporting.

Operating Asset

An Operating Asset is an asset used by a company in its day-to-day operations to generate revenue, such as machinery, buildings, or equipment.