Question

Selected data concerning the past year’s operations of the Ozarks Manufacturing Company are as follows:

		Inventories
	Beginning			Ending
Raw material	$	61,000		$	81,000
Work in process		80,000			30,000
Finished goods		90,000			110,000

Other data:

Direct material used	$	334,000
Total manufacturing costs charged to production during the year (includes direct material, direct labor, and manufacturing overhead applied at a rate of 60% of direct-labor cost)		686,000
Cost of goods available for sale		826,000
Selling and administrative expenses		30,500

Required:
1.  What was the cost of raw materials purchased during the year?

2.  What was the cost of goods sold during the year?

Answer 1

Solution

1. Cost of raw materials purchased during the year =

Raw materials consumed + Closing inventory of raw materials - Opening inventory of raw materials

So, Raw materials purchased = 334,000 + 81,000 - 61,000

= 354,000

2. Cost of goods sold = Cost of goods available for sales - Closing inventory of finished goods

Cost of goods available for sales = 826,000

Closing inventory of finished goods = 110,000

So, Cost of goods sold = 826,000 - 110,000

= 716,000