Cost of Production Report; Three Departments; Income Statement. The income statement shown below was submitted by the accountant of the North Dakota Company to the directors of the company. After a careful study of the results, the directors were of the opinion that the loss shown was incorrect. It is necessary to prepare another income statement showing unit and departmental costs at each stage of production, with the knowledge that the raw materials put in process are used at the beginning of operations in Department A.
THE NORTH DAKOTA COMPANY
Income Statement
For Year Ended December 31, 19 —
Sales (10,000 units @ $3.50) $35,000
Cost of goods sold:
Materials purchased $8,600
Direct labor — Dept. A 5,160
Direct labor — Dept. B 4,760
Direct labor — Dept. C 3,270
Factory overhead:
Department A 6,450
Department B 4,760
Department C 1,635 $34,635
Deduct :
Raw materials inventory 12/31 $ 560
Work in process, 12/31 (1,000
units in each department — all
materials, 50% labor and
overhead; 3,000 units) 3,750
Finished goods, 1 2/3 1
(400 units @ $2.50) 1,000 5310 29325
Gross profit 5675
Commercial expenses:
Marketing costs 3000
Administrative costs 5000 8000
Net loss (2325)
Required: A corrected income statement and a cost of production report with quantity schedule and computation of equivalent production.