Question

Test Company reported the following inventory balances.

Raw materials inventory, July 31	$3,000
Work-in-process inventory, July 1	$8,000
Work-in-process inventory, July 31	$6,000
Finished goods inventory, July 1	$4,000

In addition, the company reported the following information for the month of July.

Materials purchases	$14,000
Direct labor	$15,000
Administrative costs	$13,000
Direct materials used	$16,000
Selling costs	$14,000
Cost of goods manufactured	$45,000
Cost of goods sold	$46,000
Sales	$80,000

Determine the raw materials inventory for July 1 (the beginning balance).

Determine overhead cost incurred for July.

Determine the finished goods inventory on July 31 (the ending balance).

Determine the operating income for July.

Answer 1

1)	Raw materials inventory for July 1	5,000
	Direct material used	16,000
	Add;: ending raw material	3,000
	Less: Material Purchase	(14,000)
	Raw materials inventory for July 1	5,000
2)	Overhead cost for July	14,000
	Cost of Goods manufactured	45,000
	Less: Direct material used	(16,000)
	Less: Direct labour	(15,000)
	Overhead cost for July	14,000
3)	Finished goods inventory on July 31	3,000
	Cost of goods manufactured	45,000
	Add: beginning Finished inventory	4,000
	Less: Cost of Goods sold	(46,000)
	Finished goods inventory on July 31	3,000
4)	Operating income	7,000
	Sales	80,000
	Less: Cost of goods sold	(46,000)
	Gross profit	34,000
	Less: administrative cost	(13,000)
	Less: selling cost	(14,000)
	Operating income	7,000