The following data pertain to Babor Company for the fiscal year ended December 31: Prior December 31 Current December 31 Purchases of materials $ 197,500 Direct labor 130,250 Indirect labor 51,500 Factory insurance 9,300 Depreciation—factory 36,250 Repairs and maintenance—factory 14,900 Marketing expenses 148,550 General and administrative expenses 87,950 Materials inventory $ 29,500 64,750 Work-in-Process inventory 16,250 18,600 Finished Goods inventory 18,300 24,400 Sales in the current year were $660,000. Required: Prepare a schedule of cost of goods manufactured and an income statement for the current year for Babor Company.

Answer and Explanation:

The preparation is presented below:

                                            Babor Company

                                 Cost of Goods Sold Statement

                                 For the fiscal year ended December 31

Beginning work-in-process inventory                                  $16,250

Manufacturing costs:

Direct materials:                                                  

Beginning inventory                                   $29,500

Purchases                                                    $197,500

Materials available                                      $227,000

Less:  Ending inventory                               -$64,750

Direct materials used                                                             $162,250

Direct labor                                                                              $130,250

Other manufacturing costs                                                    

Indirect labor                            $51,500

Factory insurance                    $9,300

Depreciation - factory              $36,250

Repairs and maintenance -factory $14,900

Total of other manufacturing cost                                        $111,950

Total manufacturing costs:                                                    $404,450  

Total costs of work-in-process                                              $420,700

Less:  Ending work-in-process                                            -$18,600

Cost of goods manufactured                                                 $402,100

Beginning finished goods inventory                                       $18,300

Finished goods available for sale                                             $402,400

Less:  Ending finished goods inventory                                   -$24,400

Cost of goods sold                                                                     $396,000

                                            Babor Company

                                 Cost of Goods Sold Statement

                                 For the fiscal year ended December 31

Sales                                                                $660,000

Less: Cost of goods sold                               -$396,000

Gross profit                                                      $264,000

Less: Marketing expenses                             -$148,550

Less: General and administrative expenses   -$87,950

Net operating income                                        $27,500

d. the economy will face inflation.

c

explanation: