Preparation of Cost of Production Report from Income Statement

Cost of Production Report; Three Departments; Income Statement. The income statement shown below was submitted by the accountant of the North Dakota Company to the directors of the company. After a careful study of the results, the directors were of the opinion that the loss shown was incorrect. It is necessary to prepare another income statement showing unit and departmental costs at each stage of production, with the knowledge that the raw materials put in process are used at the beginning of operations in Department A.

THE NORTH DAKOTA COMPANY
Income Statement
For Year Ended December 31, 19 —

Sales (10,000 units @ $3.50)                                             $35,000

Cost of goods sold:
Materials purchased          $8,600
Direct labor — Dept. A      5,160
Direct labor — Dept. B      4,760
Direct labor — Dept. C     3,270

Factory overhead:
Department A                   6,450
Department B                   4,760
Department C                  1,635               $34,635

Deduct :
Raw materials inventory 12/31     $ 560 

Work in process, 12/31 (1,000 

units in each department — all 

materials, 50% labor and 

overhead; 3,000 units)                 3,750

Finished goods, 1 2/3 1 

(400 units @ $2.50)                   1,000         5310                29325

Gross profit                                                                           5675
Commercial expenses:                                
Marketing costs                                          3000
Administrative costs                                    5000                   8000
Net loss                                                                               (2325)

Required: A corrected income statement and a cost of production report with quantity schedule and computation of equivalent production.