Question

XYZ Company provided the following inventory information for 2021: January 1 December 31 Direct materials 14,000 19,000 Work in process 38,000 26,000 Finished goods 51,000 74,000 The following additional information was available for 2021: Advertising ........................................ $ 61,000 Cost of goods sold (unadjusted) .................... 294,000 Depreciation on copier in the sales office ......... 19,000 Direct materials purchased ......................... 123,000 Prime costs ........................................ 228,000 Sales commissions .................................. 47,000 Calculate XYZ Company's conversion costs for 2021.

Answer 1

Direct material used:

Materials used:	Amount
Direct material used:
Opening balance	14,000
purchases	123,000
Materials available	137,000
closing inventory	19,000
Total materials used	118,000

Direct labor = primce cost - direct material used = 228000-118000 = 110000

Conversion costs = 77,000 (balancing figure to arrive at cost of goods sold of 294,000 in the below table.

Schedule of cost of goods manufactured and cost of goods sold
Particulars	Amount		Amount
Beginning work In progress inventory			38,000.00
Materials used		118,000.00
Direct labor		110,000.00
Manufacturing overhead applied		77,000.00
Total manufacturing costs for the period		305,000.00	305,000.00
Total manufacturing costs to account for			343,000.00
Less: closing work In progress inventory			26,000.00
Cost of goods manufactured			317,000.00
Add: Opening finshed goods			51,000.00
Cost of goods available for sale			368,000.00
Less: closing finished goods			74,000.00
Cost of goods sold			294,000.00

Conversion costs = direct labor + overhead applied = 110,000 + 77,000 = 187,000