Question

Net income is $40,000 raw materials Nov 1 $ 17,000 Nov 30? WIP Nov 1 $14,00 Nov 30 12,000 Finished goods Nov 1 ? Nov 30 9,000 sales revenue 102,000 Direct labor 10,000 Manufacturing OH 12,000 selling expenses 14,000 Administrative expenses 16,000 Cost of goods manufactured 40,000 raw materials purchased 10,000 What is ending raw material? What is beginning finished goods?

Answer 1

Ans.   1	The formula to calculate ending raw materials inventory is as following:
	*To put the values in the formula we need to calculate direct materials used which can be find out by the following way:
	Ending raw materials inventory = Beginning raw materials + Raw materials purchased - Direct materials used
	$17,000 + $10,000 - $16,000
	$11,000
	*Calculations:
	Particulars	Amount
	Cost of goods manufactured	$40,000
	Less : Beginning Work in process inventory	-$14,000
	Add : Ending Work in process inventory	$12,000
	Total manufacturing costs	$38,000
	Less : Direct labor	-$10,000
	Less: Manufacturing overhead	-$12,000
	Direct materials used	$16,000
Ans. 2	*To calculate beginning finished goods inventory we need to compute the cost of goods sold first.
	Net income	$40,000
	Add: Selling expenses	$14,000
	Add: Administrative expenses	$16,000
	Gross profit	$70,000
	Cost of goods sold = Sales revenue - Gross profit
	$102,000 - $70,000   =   $32,000
	Cost of Goods sold	$32,000
	Add: Ending finished goods inventory	$9,000
	Cost of goods available for sale	$41,000
	Less: Cost of goods manufactured	-$40,000
	Beginning finished goods inventory	$1,000