Question

Assume you are the accounting manager of Kitten Ltd. being asked from your senior manager to prepare inventory records and compute the closing value of inventory, cost of manufacturing, and cost of goods sold to be reported in the Financial Statements. Following are the inventory related activities that were performed during the period.

1 Purchased 960 units @ 56 per unit

2 Purchased 420 units @54 per unit

3 Issued 280 units to the manufacturing department

4 Manufacturing department worked on the 280 units and incurred $4,430 as direct cost and $2,870 as indirect cost towards completing these units.

5 Purchased 170 units @57 per unit

6 Issued 610 units to the manufacturing department, which were completed and $8,460 was spent on its manufacturing

7 Sold 180 units with the selling price of $105 per unit

8 Purchased 210 units @53.5 per unit

9 Issued 340 units to the manufacturing department The manufacturing department could complete only 210 units Following are the costs that were incurred on 340 units Cleaning $1,460 Direct labor $3,050 Utilities $180 Chemicals $115 Allocation on indirect cost $2,690 Out of these cost, 80% belongs to the completed goods

10 Sold 95 units @105 per unit

Assume that the stores department had a opening balance of 130 units purchase for a total value of $7,020 (Use weighted average method of inventory valuation)

Answer 1

Closing Value of Inventory
Raw Materials	$ 36,342.80
Work in Process	4,892.76
Finished Goods	64,615.69
Total Closing Value of Inventory	$ 105,851.25

Cost of Goods Manufactured : $ 84,649.44

Cost of Goods Sold: $ 20,033.75

 

Raw Materials Inventory
	Cost of Purchase	Cost of Goods Issued/ Sold	Inventory on Hand
Transaction/ Event	Units	Cost per Unit	Amount	Units	Cost per Unit	Amount	Units	Cost per Unit	Amount
Beginning							130	$ 54	7,020
1.	960	$ 56	53,760				960	$ 56	53,760
							1,090	55.76	60,780
2.	420	54	22,680				1,510	55.27	83,460
3.				280	55.27	$ 15,475.60	1,230	55.27	67,984.40
5.	170	57	9,690				1,400	55.48	77,674.40
6.				610	55.48	33,842.80	790	55.48	43,831.60
8.	210	53.50	11,235				1,000	55.07	55,066.60
9.				340	55.07	18,723.80	660	55.07	36,342.80
Ending balance	1,760		74,685	1,230		68,042.20	660	55.07	36,342.80

 

Work in Process Inventory
Beg. bal.	$ 0	Cost of Goods Manufactured	22,775.60
Raw materials inventory ( 1,230 units )	68,042.20	Cost of Goods Manufactured	42,302.80
Other costs of manufacturing	21,500	Cost of Goods Manufactured	19,571,04
End. bal.	4,892.76

 

Finished Goods Inventory
Beg. bal.	0	Cost of Goods Sold ( 180 units )	$ 13,113
Cost of Goods Manufactured ( 280 units)	22,775.60	Cost of Goods Sold ( 95 units)	6,920.75
Cost of Goods Manufactured ( 610 units)	42,302.80
Cost of Goods Manufactured ( 272 units )	19,571.04
Bal.	64,615.69
Total	84,649.44