Question

1.The following inventory data relate to the Reta Company:

INVENTORIES

	Beginning	Ending
Finished goods	$80,000	$100,000
Work in process	65,000	70,000
Direct materials	60,000	64,000

Revenues and costs for the period:

Sales	$740,000
Cost of goods available for sale	650,000
Total manufacturing costs	575,000
Factory overhead	154,000
Direct materials used	164,000
Selling and administrative expenses	51,000

a. Direct materials purchased
b. Direct labor costs incurred
c. Cost of goods sold
e. How does cost of goods sold statement differ from income statement?

2.The following data was taken from the general ledger and other records of Martinez Manufacturing Co. at July 31, the end of the first month of operations in the current fiscal year:
Sales $50,000
Materials inventory (July 1) 15,000
Work in process inventory (July 1) 20,000
Finished goods inventory (July 1) 28,000
Materials purchased 21,000
©Al Tareeqah Management Studies - 2020 8

Direct labor cost 12,500
Factory overhead (including $5,000 of indirect materials used and $2,500 of indirect labor cost)

11,500
Selling and administrative expense 8,000
Inventories at July 31:
Materials 16,000
Work in process 18,000
Finished goods 30,000
a. Prepare a statement of cost of goods manufactured.
b.Determine the cost of goods sold for the month.
c. What are the applications of cost of goods sold and cost of goods manufactured statements?

Answer 1

Problem 1 –

a)ui

Direct materials purchased = $168,000

Direct materials used	$164,000
Plus: Ending Direct materials	64,000
Less: Beginning direct materials	60,000
Direct materials purchased	$168,000

b)

Direct labor cost incurred = $257,000

Direct materials used	$164,000
Direct labor cost (Balancing figure)	$257,000
Factory Overheads	$154,000
Total Manufacturing Costs	$575,000

c)

Cost of goods sold = $550,000

Cost of goods available for sale	$650,000
Less: Ending Finished Goods	$100,000
Cost of goods sold	$550,000

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