Reference no: EM132881499
Problem - Financial statements of a manufacturing firm - The following events took place for Fed Inc. during October 2012, the first month of operations as a producer of road bikes:
Purchased $427,000 of materials.
Used $367,500 of direct materials in production.
Incurred $315,000 of direct labor wages.
Applied factory overhead at a rate of 80% of direct labor cost.
Transferred $892,500 of work in process to finished goods.
Sold goods with a cost of $848,750.
Sold goods for $1,500,000.
Incurred $367,500 of selling expenses.
Incurred $131,950 of administrative expenses.
Required -
a. Prepare the October income statement for Fed. Assume that Fed uses the perpetual.
b. Determine the inventory balances at the end of the first month of operations.