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In: Accounting

Quacker Manufacturing uses just-in-time inventory techniques to reduce their carrying costs. Despite having a low level...

Quacker Manufacturing uses just-in-time inventory techniques to reduce their carrying costs. Despite having a low level of working capital, they experience significant sales and production levels. Quacker reported the following information at year-end:

Beginning Raw Materials Inventory

$1,000

Ending Raw Materials inventory:

$5,200

Beginning Work in Process:

$4,000

Ending Work in Process:

$4,200

Beginning Finished Goods Inventory:

$2,400

Ending Finished Goods Inventory:

$1,800

Materials Purchased:

$130,000

Indirect Materials Used:

$4,000

Direct Labor Wages:

$144,000

Indirect Labor Wages:

$200,000

Production Equipment Depreciation:

$10,000

Production Equipment Maintenance:

$6,000

Factory Rent:

$10,000

Office Supplies Used:

$400

Selling and Administrative Expenses:

$325,000

What was Quacker’s:

Direct Materials usage?

Total Manufacturing Overhead for the period?

Cost of Goods Manufactured?

Cost of Goods Sold for the period?

Solutions

Expert Solution

Direct material usage is $125800

Total manufacturing overhead for the year is $230000

Cost of goods Manufacture is $499600

Cost of Goods sold is $500200

Calculation

Preparation of statement of cost of goods sold

Particulars
Beginning WIP Inventory $4000
Direct Material
Beginning inventory $1000
Rawmaterial Purchase $130000
Total Raw material Available $131000
Less: Ending Raw material $(5200)
Direct material Usage in production $125800
Direct labour $144000
Manufacturing Overhead
Indirect material used $4000
Indirect labour wages $200000
Equipment Depreciation $10000
Equipment maintainance $6000
Factory Rent $10000
Total Manufacturing overhead $230000
Manufacturing cost $499800
Less Ending WIP $(4200)
Cost of Goods Manufacture $499600
Add : Beginning finished good inventory $2400
Less: Ending Finished Inventory $(1800)
Cost of Goods Sold $500200

1) Depreciation on factory equipment , maintance and rent is product cost as the its Equipment , building are utilise for making the product .

2) office supplies , selling amd adminitration cost are period cost as this are the cost incurred after completion of production and are no product cost hence will not be consider while calculating cost of goods sold but will be charge to Income statement seperately .

ekkarill92 answered 2 years ago
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