MY Factory had the following activities during the year ended 31 December 2019: Sales revenue 580,000...

MY Factory had the following activities during the year ended 31 December 2019:

Sales revenue	580,000
Work in process inventory, Dec 31	22,000
Work in process inventory, Jan 1	30,000
Selling & administrative expense	80,000
Purchase of raw material	111,000
Raw material inventory, Dec 31	15,000
Raw material inventory, Jan 1	29,000
Labor (70% direct)	120,000
Factory utilities	22,000
Depreciation of factory equipment	35,000
Finished goods inventory, Dec 31	22,000
Finished goods inventory, Jan 1	15,000
Indirect material used	8,000

What is the prime cost for the year ended 31 December 2019? What is the conversion cost for the year ended 31 December 2019?

Expert Solution

Statement showing Prime cost for the year ended 31 December 2019

Beginning Raw Materials	29,000
Add: Raw materials purchased	111,000
Total materials available for Sale	140,000
Less: Ending Raw materials	15,000
Direct Materials used		125,000
Add: Direct labor (120,000*70%)		84,000
Prime cost		$ 209,000

Statement showing conversion cost for the year ended 31 December 2019


Conversation cost		Amount $
Direct labor		84,000
Add: factory overhead
Indirect Materials	8,000
Indirect labor (120,000*30%)	36,000
Depreciation on factory plant & equipment	35,000
Factory utilities	22,000	101,000
Conversation cost		$ 185,000

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