Question

Bodin Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January. January 1 January 31 Finished goods $ 125,000 $ 117,000 Work in process 237,000 251,000 Raw material 134,000 124,000

The following additional data pertain to January operations. Raw material purchased $ 190,000 Direct labor 350,000 Actual manufacturing overhead 170,000 Actual selling and administrative expenses 115,000 The company applies manufacturing overhead at the rate of 60 percent of direct-labor cost. Any overapplied or underapplied manufacturing overhead is accumulated until the end of the year.

Compute the company's prime cost for January

Computer total Manufacturing Costin January

Compute Cost of Good Manufactured in January.

Compute Cost of Goods Sold for January

Compute the balance in the manufacturing overhead account on January 31. Debit or credit?

Answer 1

Bodin Company

Q1. What is Company’s Prime cost for the month of January?

Prime cost meaning: Prime costs are those costs which are directly related to the materials and labor used in the production. Generally companies uses prime cost to price their product.

Formula: Prime cost = Direct materials purchased + op stock of RM - closing stock of RM + Direct Labor

                                     = $ 190,000 + $ 134,000 - $ 124,000 + $ 350,000

                                     = $ 550,000/-

Q2. Compute Total Manufacturing costing for the month of January.

Manufacturing cost meaning: Manufacturing costs are costs of material plus cost to convert the materials into products. Such costs are used to value the inventories of the companies and calculation of Cost of goods sold (COGS).

Formula: Manufacturing costs = Prime cost + Manufacturing overheads + op stock of WIP – cl stock

                                                             of WIP

                                                        =    $ 550,000 + $ 170,000 + $ 237,000 - $ 251,000

                                                        =     $ 706,000/-

Q3. Compute cost of goods manufactured in the month of January.

Cost of goods manufactured meaning (COGS): Such costs are those cost of the goods which are produced in a particular product and includes direct materials, direct labor and manufactured overheads that are included in the products that moved from the manufacturing space to finished goods inventories during a particular period.

Formula: COGS = Manufacturing costs + Selling & Admin expenses

                            = $ 706,000 + $ 115,000

                           =   $ 821,000/-  

Q4. Compute the Cost of goods sold for the month of January.

Cost of goods sold meaning: Such costs are those costs of the products that manufacture has sold

Formula: COS = Opening stock of finished goods (+) Cost of goods manufactured

                               (-) Closing stock of finished goods

                                = $ (125,000 + 821,000 -117,000)

                                =   $ 829,000/-

Q5. Compute the balance in the manufacturing overhead account in the month of January.

Balance in manufacturing overhead account = Overheads absorbed – Actual overhead expense

                                                                                  = ($ 350,000 x 60%)   -   $ 170,000

                                                                                  = $ 40,000 credit balance