Question

Bodin Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January.

	January 1			January 31
Finished goods	$	124,000		$	117,000
Work in process		235,000			251,000
Raw material		133,000			124,000

The following additional data pertain to January operations.

Raw material purchased	$	191,000
Direct labor		350,000
Actual manufacturing overhead		175,000
Actual selling and administrative expenses		115,000

The company applies manufacturing overhead at the rate of 60 percent of direct-labor cost. Any overapplied or underapplied manufacturing overhead is accumulated until the end of the year.

Required:

1. Compute the company’s prime cost for January.

2. Compute the total manufacturing cost for January.

3. Compute the cost of goods manufactured for January.

4. Compute the cost of goods sold for January.

5. Compute the balance in the manufacturing overhead account on January 31. Debit or credit?

Answer 1

1.)	Prime Cost
		Amount $
	Raw Material consumed	200,000	=133000+191000-124000
	Add: Direct labor	350,000
	Prime Cost	550,000
2.)		Amount $
	Prime Cost	550,000
	Add: Applied Overhead	210,000	=350000*60%
	Total Manufacturing Cost	760,000
3.)		Amount $
	Total Manufacturing Cost	760,000
	Add: Work in process , Jan.1	235,000
	Less: Work in process, Jan .31	-251,000
	Cost of goods manufactured	744,000
4.)		Amount $
	Cost of goods manufactured	744,000
	Add: Finished goods, Jan .1	124,000
	Less: Finished Goods, Jan .31	-117,000
	Cost of goods sold	751,000
5.)	Credit Balance in Manufacturing overhead	$ 35,000	=210000-175000