Question

The following data should be used for the question(s) below:

Raw materials inventory, January 1 $ 12,000

Raw materials inventory, December 31 16,000

Work in process, January 1 5,000

Work in process, December 31 8,000

Finished goods, January 1 17,000

Finished goods, December 31 12,000

Raw materials purchases 118,000

Direct labor 165,000

Factory utilities 64,000

Indirect labor 12,000

Factory depreciation 18,000

Selling and administrative expenses 220,000

1) Assume manufacturing costs is $400,000. How much is cost of goods manufactured? 2) Assume goods manufactured is $420,000. How much is cost of goods sold? 3) How much is the cost of the direct materials used? 4) Assume direct materials is $130,000. How much are total manufacturing costs?

Answer 1

Opening Stock of Raw Material 12000

Add : Purchased during the year 118000

Less: Closing stock of Raw matrial -16000

Raw Material consumed 114000

Add : Direct Labour 165000

Opening WIP 5000

Less : Closing WIP - 8000

Add : Factory utilities 64000

Add : Factory Depn 18000 (Treated as direct exp)

Prime Cost 358000

Add: Indirect labour    12000

Add: Manufacturing exp 400000

Add : Opening F.goods 17000

Less : Closing F,good - 12000

1.Cost of goods sold    775000

2. In case manufactured cost is 420000,

Cost of goods sold would be 775000+20000= 795000 assuming indiret labour cost would remain unchanged.

3, Cost of direct matrial used :114000 ( as shown above)

4. If direct material cost is 130000, manufacturing cost would be :

Prime cost would be =358000*130000/114000 408245

Add : Indirect labour 12000

Manufacturing cost 400000

Add : Opg. FG 17000

Less : Clg FG -12000

Cost of goods sold 825245

Note : Selling and Admn expenses have not been considered

for :COST OF GOODS SOLD purpose