Question

Conrad, Inc. recently lost a portion of its records in an office fire. The following information was salvaged from the accounting records.

Cost of Goods Sold

$65,000

Work-in-Process Inventory, Beginning

10,500

Work-in-Process Inventory, Ending

9,000

Selling and Administrative Expense

15,000

Finished Goods Inventory, Ending

15,000

Finished Goods Inventory, Beginning

?

Direct Materials Used

?

Factory Overhead Applied

12,000

Operating Income

14,000

Direct Materials Inventory, Beginning

11,000

Direct Materials Inventory, Ending

6,000

Cost of Goods Manufactured

60,000

Direct labor cost incurred during the period amounted to 1.5 times the factory overhead. The CFO of Fisher, Inc. has asked you to recalculate the following accounts and to report to him by the end of the day.

What is the amount of direct materials purchased?

Answer 1

• Requirement “Direct material purchased”.
• #1: Calculate Total Manufacturing cost.
  Total manufacturing cost + Beginning WIP – Ending WIP = Cost of goods manufactured
  Total manufacturing cost + $ 10500 – 9000 = $ 60000
  Total manufacturing cost = 60000 + 9000 – 10500
  Total manufacturing cost = $ 58,500
• #2: Calculate Total Direct Labor Cost.
  Direct Labor cost = 1.5 times the Factory Overhead
  = 1.5 x $ 12000
  = $ 18,000
• #3: Calculate ‘direct material cost’ used.
  Direct Material cost used + Direct Labor cost + Factory Overhead = Total manufacturing cost
  Direct Material cost used + $ 18000 + $ 12000 = $ 58500
  Direct Material cost used = 58500 – 18000 – 12000
  Direct Material cost used = $ 28,500
• Answer calculation:
  Beginning direct material + Direct material purchased – Direct material cost used = Ending direct material
  $ 11000 + Direct material purchased - $ 28500 = $ 6000
  Direct material purchased = 6000 + 28500 – 11000
  Direct material purchased = $ 23,500
• Answer = $ 23,500 Direct material purchased.