Question

On September 26, we set up a quasi-manufacturing facility in the classroom producing patchwork quilts. Assume you expand your operation to make mini-patchwork quilts for dolls and incur the following costs:

Cost Item	Amount
Direct Materials Used	$140,000
Direct Manufacturing Labor Costs (workers are pd hourly)	$22,000
Plant Utility Costs	$5,000
Indirect Manufacturing Labor Costs—Variable	$18,000
Indirect Manufacturing Labor Costs—Fixed	$14,000
Other Indirect Manufacturing Costs—Variable	$8,000
Other Indirect Manufacturing Costs—Fixed	$26,000
Marketing, Distribution & Customer-Service Variable Costs	$120,000
Marketing, Distribution & Customer-Service Fixed Costs	$43,000
Fixed Administrative Costs	$54,000

Inventory Data	Beginning	Ending
Direct Materials	0 feet	2300 feet
Work in Process	0 units	0 units
Finished Goods	0 units	? units

Additional Data:

Variable manufacturing costs are variable with respect to units produced.

Variable marketing, distribution & customer-service costs are variable with respect to units sold.

Production for the current year was 100,000 units

Two feet of direct materials are used to make one unit of finished product.

Revenues for the current year were $473,200.

The selling price per unit and the purchase price per foot of direct materials remained stable throughout the year.

Ending inventory of finished goods is carried at the average unit manufacturing cost.

Ending Finished Goods inventory was $20,970.

Required:

Calculate the total cost of ending direct materials inventory.

Identify Fixed and Variable Manufacturing Costs. What is the total cost for each?

Prepare a Schedule of Cost of Goods Manufactured in good form.

Calculate the average unit manufacturing cost

Calculate the total units in ending finished goods inventory

Answer 1

Answer-1: Total Cost of Ending Direct Material Inventory:

Production for the Year = 100,000 units

Direct Material Used for Production = 100,000 * 2 = 200,000 feet

Cost of direct material used = $ 140,000

Cost of Material per feet = 140,000 / 200,000 = $ 0.7 per feet

So cost of Ending Direct Material Inventory = 2300 * 0.7 = $ 1,610

Answer-2:   Manufacturing Cost

a.   Variable Manufacturing Cost = Direct Material + Direct Labour + Indirect Labour (Variable) + Other             Indirect Manuf. Cost (Variable) = $ 188,000

b.   Fixed Manufacturing Cost = Plant Utility Costs + Indirect Labour (Fixed) + Other Indirect Manuf. Cost (Fixed) = $ 45,000

Answer-3: Schedule of Cost of Goods Manufactured

Schedule of Cost of Goods Manufactured
Direct Material:
Raw Material Inventory, Beginning	0
Raw Material Purchased	141610
Raw Material Inventory, Ending	-1610	140000
Direct Labour		22000
Manufacturing Overheads
Plant Utility Costs		5000
Indirect Manufacturing Labour Cost (Variable)		18000
Indirect Manufacturing Labour Cost (Fixed)		14000
Other Indirect Manufacturing Cost (Variable)		8000
Other Indirect Manufacturing Cost (Fixed)		26000
Total Manufacturing Costs		233000
Add: WIP Inventory, Beginning		0
Less: WIP Inventory, Ending		0
Cost of Goods Manufactured		233000

  

Answer-4: Average Unit Manufacturing Cost

      = Total Manufacturing Cost / Total Production

      = 233,000 / 100,000 = $ 2.33 per unit

Answer-5: Finished Goods Inventory, Ending

                    Value of Finished Goods Inventory, Ending = 20,970

                    Units = 20,970 / 2.33 = 9000 units