Problem 2-43 (35 minutes)
1.
Laredo Luggage Company
Schedule of Cost of Goods Manufactured
For the Year Ended December 31, 20x2

Direct material:

Raw-material inventory, January 1
$ 20,000

Add: Purchases of raw material 90,000

Raw material available for use
$110,000

Deduct: Raw-material inventory, December 31 12,500

Raw material used

$97,500

Direct labor

100,000

Manufacturing overhead:

Indirect material
$ 5,000

Indirect labor
7,500

Utilities: plant
20,000

Depreciation: plant and equipment
30,000

Other 40,000

Total manufacturing overhead

102,500

Total manufacturing costs

$300,000

Add: Work-in-process inventory, January 1

20,000

Subtotal

$320,000

Deduct: Work-in-process inventory, December 31

15,000

Cost of goods manufactured

$305,000

2.
Laredo Luggage Company
Schedule of Cost of Goods Sold
For the Year Ended December 31, 20x2

Finished goods inventory, January 1
$ 10,000

Add: Cost of goods manufactured
305,000

Cost of goods available for sale
$315,000

Deduct: Finished-goods inventory, December 31 25,000

Cost of goods sold
$290,000
Problem 2-43 (Continued)
3.
Laredo Luggage Company
Income Statement
For the Year Ended December 31, 20x2

Sales revenue
$475,000

Less: Cost of goods sold 290,000

Gross margin
$185,000

Selling and administrative expenses 75,000 Income before taxes
$110,000

Income tax expense 45,000

Net income
$65,000

4. In the electronic version of the solutions manual, press the CTRL key and click on the following link: 10E - Build a Spreadsheet 02-43.xls

PROBLEM 2-44 (30 MINUTES)
1. Manufacturing overhead:
Indirect labor……………………………….
$ 218,000
Building depreciation ($160,000 x 75%).. 120,000
Other factory costs……………………….. 688,000
Total……………………………………...
$1,026,000

2. Cost of goods manufactured:
Direct