Reference no: EM13673308

Early in the year Jhon Raymond founded Raymond enineering Co. for the purpose of manufacturing a special flow control valve that he had designed. shortly after year ended the company's accountant was injured in a skiing accident and no year end financial statements were pre prepared. however, the accountant had correctly determined the year end inventories at the following amounts
materials 46,000
work in process 31,500
finished goods (3,000) units 88,500
as t6his was the first year of operations there were no begining inventories while the accountant was in the hospital. Raymond improperly prepared the following income statement from the company's accounting records
net sales 610,600
cost of goods sold
purchases of direct materias 181,000
direct labor costs 110,000
manufactiring overhead 170,000
selling expenses 70,000
addministrative expenses 132,000
total costs 663,600
net loss for the year 53,000
Raymmond was very disapponted in these operating results. he stated not only did we lose more than 50,00 this year but look at our unit prodution costs. we sold 10,000 units this year at a cost of 663,600 that amounts to a cost of 66.36 pe unit. I dont need an accountant to know thiss business is a failure
instructions
a. prepare a schedule of the cosst of finished goods manufactured for the year. ( as there wee no begining inventories your schedules will start with manufacturing costs assigned to prroduction) show a supporting computation of the cost of direct materials used during the year
b. compute the average cost per unit manufactured
c. prepare a corrected income statement for the year using the multiple step format. if the company has earned any operatingg income assume an income tax rate of 30 percent (omit earnings per share figures)
d. explain wether you agree or disagree with Raymond's remarks that the business is unprofitaable and that the nit cosy of production ( 66.36 according to raymond) is much higher than that of competitors ( around 35) if you disagree with Raymond explain any errors or shortcomings in his analysis.