Question

XYZ Company recorded the following information related to their inventory
accounts for 2020:

                          January 1, 2020        December 31, 2020
Direct materials               31,000                   50,000
Work in process                38,000                   41,000
Finished goods                 22,000                   34,000

The following information was taken from XYZ Company's accounting records
for 2020:

Sales revenue ...........................................   $630,000
Direct materials purchased ..............................       ?
Depreciation, factory equipment .........................     34,000
Prime costs .............................................    250,000
Utilities (60% for factory; 40% for office building) ....     20,000
Sales commissions .......................................     71,000
Indirect materials ......................................       ?
Depreciation, office equipment ..........................     30,000
Rent, factory building ..................................     56,000
Net income ..............................................     10,000
Direct labor ............................................       ?
Advertising .............................................     68,000
Production supervisor's salary ..........................     74,000

Additional information:

1.  Direct labor comprised 35% of the conversion costs for 2020.

2.  The actual overhead cost for 2020 was equal to the overhead applied
    to production. Thus there was no overhead variance for 2020.

Calculate XYZ Company's indirect materials cost for 2020.

Answer 1

The missing figures have to be found out by
preparing, Schedules of cost of production and
cost of goods sold and income statement by
connecting the available data in the three
statements.
SCHEDULE OF COST OF PRODUCTION
Beginning inventory of WIP			$        38,000
Direct materials:
Beginning inventory of direct materials	$           31,000
Purchase of direct materials [188000-31000]	$       1,57,000
Direct materials available for use [138000+50000]	$       1,88,000
Ending inventory of direct materials	$           50,000
Direct material cost [250000-112000]		$     1,38,000
Direct labor [208000*35%/65%]		$     1,12,000
Prime costs		$     2,50,000
Overhead:
Indirect materials [208000-74000-56000-12000-34000]	$           32,000
Depreciation, factory equipment	$           34,000
Utilities [20000*60%]	$           12,000
Rent, factory building	$           56,000
Production supervisor's salary	$           74,000
Total overhead [458000-250000]		$     2,08,000
Manufacturing cost incurred during the period [496000-38000]		$     4,58,000
Total manufacturing costs [455000+41000]			$     4,96,000
Ending WIP inventory			$        41,000
Cost of goods manufactured [from Schedule of COGS]			$     4,55,000
SCHEDULE OF COST OF GOODS SOLD
Beginning finished goods inventory		$        22,000
Cost of goods manufactured [477000-22000]		$     4,55,000
Cost of goods sold available for sale [443000+34000]		$     4,77,000
Ending finished goods inventory		$        34,000
Cost of goods sold [From income statement]		$     4,43,000
INCOME STATEMENT
Sales revenue		$     6,30,000
Cost of goods sold [630000-187000]		$     4,43,000
Gross profit [10000+177000]		$     1,87,000
Operating expenses:
Sales commissions	$           71,000
Advertising	$           68,000
Utilities [20000*40%]	$             8,000
Depreciation-Office equipment	$           30,000
Total operating expenses		$     1,77,000
Net income		$        10,000
Note:
Indirect materials is assumed to be purchased and used
immediately. No stock is kept. That is, direct materials
do not include indirect materials.