Andrew Electronics manufactures and sells smartphones. Unfortunately, the company recently suffered serious
fire damage at its home office. As a result, the accounting records for July were partially destroyed and completely
jumbled. Andrew has hired you to help figure out the missing pieces of the accounting puzzle. Assume that
Andrew Electronics’ raw Materials inventory contains only direct materials.
Work in process inventory, July 31 $ 1,600
Finished goods inventory, July 1 $ 4,900
Direct Labor incurred in July $ 3,500
Purchases of direct materials in July $ 9,700
Work in process inventory, July 1 $ 0
Revenues in July $ 27,200
Direct materials used in July $ 8,200
Raw materials inventory, July 31 $ 3,600
Manufacturing overhead for July $ 6,300
Gross profit percentage 45%
Note: Gross Profit % = Gross Profit * Revenues
Inventory Flow: T Accounts:
Raw Materials WIP FG Inventory
Beg Inv
DM used in
Production
Beg Inv Beg Inv COGS
COGM
Purchases DM COGM
End Inv
DL End Inv
MOH
End Inv
COGS
COGS
Find the following:
a. Cost of Goods Sold in July
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Activity 4:
missing amounts:
Chapter 2
Manufacturing Inventory Flow: – COGM & COGS – Income Statement – Work backwards to find
Chapter 2
b. Beginning Raw Materials Inventory =
Beginning raw materials inventory
Plus: Purchases of direct materials (Given)
= Available for use
Less: Ending raw materials inventory
(Given)
Direct materials used (Given)
c. Ending Finished Goods Inventory
Beginning work in process inventory
Plus: Manufacturing costs incurred:
Direct materials used
Direct labor
Manufacturing overhead
=Total manufacturing costs to account
for
Less: Ending work in process inventory
=Cost of goods manufactured
Beginning finished goods
inventory
Plus: Cost of goods manufactured
Cost of goods available for sale
Less: Ending finished goods
inventory
Cost of goods sold (from part A)
d. Prepare an income statement for Andrew Electronics for July. Assume that the company incurred
marketing expenses of $3,240 and $6,000 and general and administrative expenses.
Sales
Less: Cost of Goods Sold
Gross Profit
Less: Operating Expenses
Operating Income
Copyright©2022, School of Accountancy, Arizona State University
Raw Materials
BB RM Used
Purch
EB
WIP
BB COGM
DM used
DL
MOH
EB
FG
BB COGS
COGM
EB
Chapter 2
e. Andrew Electronics’ cost of goods manufactured is greater than cost of goods sold. What does this mean?
a. finished goods inventory increased during the period
b. finished goods inventory decreased during the period
c. work in process increased during the period
d. gross margin increased from last period
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