Submitted by: Submitted by dmartinez
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Words: 376
Pages: 2
Category: Business and Industry
Date Submitted: 03/13/2012 02:32 PM
Case Study I Solution
The following cost items are needed before a schedule of cost of goods manufactured can be prepared:
Materials used in production:
Prime Costs 545,000
Less Direct Labor Cost 220,000
Direct Materials Cost 325,000
Manufacturing Overhead Cost:
Direct Labor Cost/ Percentage of Conversion Cost: 220,000/35% $628,571.43
rounded to nearest dollar 628,571 ( this is total conversion cost)
100%-65% = 35%
Conversion Cost 628,571
Less Direct Labor Cost 220,000
Manufacturing Overhead 408,571
Cost of Goods Manufactured:
Cost of Goods Available for Sale $1,020,000
Less: finished goods inventory, beginning 35,000
Cost of Goods Manufactured $985,000
The easiest way to proceed from this point is to place all of the amounts that are known in a partially
completed schedule of cost of goods manufactured and a partially completed income statement. Then
fill in the missing amounts by analyzing the available data.
Direct Materials:
Raw Materials Inventory, beginning 41,000
Add: Purchases of Raw Materials 325,000
Raw Materials Available for use 366,000
Deduct: Raw Materials inventory, ending A 41,000
Raw Materials Used in Production ( See above) 325,000
Direct Labor Cost 220,000
Manufacturing Overhead Cost (See Above) 408,571
Total Manufacturing Costs 953,571
Add: Work in Process inventory, beginning 56,000
1,009,571
Deduct: Work in Process inventory, ending B $24,571
Cost of Goods Manufactured $985,000
Therefore, A is Raw Materials Available for Use...