Topics: Generally Accepted Accounting Principles, Work in progress, Inventory Pages: 4 (974 words) Published: January 15, 2012
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Question 1
International Beans, Inc. (IBI) is a processor and distributor of a variety of blends of coffee. The company buys green (unprocessed) coffee beans from around the world and roasts, blends, and packages them for resale. IBI offers a large variety of different coffees that it sells to gourmet shops in one-kilogram bags. The major cost of the coffee is raw materials in the form of unprocessed coffee beans. However, the company’s predominately automated roasting, blending, and packing processes require a substantial amount of manufacturing overhead. Some of IBI’s coffees are very popular and sell in large volumes, while a few of the newer blends sell in very low volumes. IBI prices its coffees at manufacturing cost plus a markup of 25% with some adjustments made to keep the company prices competitive. IBI has just completed a year of operations and the controller has called a meeting for tomorrow morning. As the assistant controller you are asked to prepare the following: •Schedule of cost of goods manufactured

•Income statement
These will be presented to the executive committee at the meeting. Unfortunately, you cannot get access to the company’s general ledger system. However, you were able to find information on ending inventories from last year’s reports, and you have paper copies of inventory counts taken at the end of this year. Here is what you found: BeginningEnding

Raw materials $55,000$60,000
Work in Progress $85,000$75,000
Finished Goods$140,000$110,000

IBI assigns manufacturing overhead to products based on machine hours. At the beginning of the year, it was estimated that manufacturing overhead would cost $2,125,000 and there would be 50,000 machine hours. You were also able to gather the following additional information: 1. Purchase of raw materials: $6,300,000. The raw materials account includes both direct and indirect materials.  Both direct and indirect materials are drawn from the...
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