Rock Shop Manufacturing Company makes specialty tools. In July, Rock Shop incurred manufacturing costs of $4,000,000...

Rock Shop Manufacturing Company makes specialty tools. In July, Rock Shop incurred manufacturing costs of $4,000,000 for direct materials, direct labour, and overhead. 30% of the total costs represents overhead applied. The overhead rate is $1 for every $0.50 of direct labour costs incurred. Inventory balances were:

July 1 / July 31
Raw materials $100,000 / $ 80,000
Work in process 90,000 / 95,000
Finished goods 120,000 / 130,000

Instructions
a) Determine the cost of raw materials purchased in July.
b) Prepare a cost of goods manufactured schedule for July 2016

Expert Solution

a)

Ending raw materials inventory	80,000.00
Direct materials used	2,200,000.00
	2,280,000.00
Beginning raw materials inventory	100,000.00
Raw materials purchases	2,180,000.00

Working Note-

Overhead Applied (4,000,000*30%)	1,200,000.00
Direct labor used (1,200,000*0.5)	600,000.00
Direct materials used	2,200,000.00

b.

Rock Shop Manufacturing Company
Cost of Goods Manufactured Schedule
For the Month Ended July 31, 2016

Work in process, July 1		90,000.00
Direct materials used	2,200,000.00
Direct labor	600,000.00
Manufacturing overhead applied	1,200,000.00
Total manufacturing costs		4,000,000.00
Total cost of work in process		4,090,000.00
Work in process, July 31		95,000.00
Cost of goods manufactured		3,995,000.00

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