Question

DEF Manufacturing Company presented the following data:

• Cost of goods manufactured and cost of goods sold were P375,000 and P300,000, respectively.
• Purchases of raw materials amounted to twice as much as the net income before tax.
• Gross margin based on sales was 40%. There were no purchase returns but the sales returns amounted to P10,000.
• Inventory valuations were as follows:

1. Raw materials on hand at the end of the period was 1/3 as much as much as at start.
2. Work in process – no beginning inventory but P25,000 was on hand at the end of the period.
3. Finished goods end of the period was four times as larges as at start.

• Breakdown of cost incurred in manufacturing was as follows:

Raw materials                                                    50%

Direct labor                                                         30%

Factory Overhead                                            20%

• Selling expenses amounted to four times as as as general expenses
• Net income after taxes amounted to P52,000. Income tax rate is 35%.

1-A. Raw materials beginning? ________

1-B. Raw materials Purchases? _______

1-C Total direct materials used? _______

1-D Total factory overhead applied? ______

1-E Finished Goods ending? _________

Answer 1

DEF Manufacturing company

Cost of goods manufcactured= Direct material + Direct labour +Factory ovrheads + Opening stock of WIP- Closing stock of WIP

Cost of goods sold= Cost of goods manufcactured+ Opening stock of Finished goods - Closing stock of Finished goods

Table 1
Sales- Cost of Goods sold = Gross Margin
Let sales be' X'
X-300000(GIVEN)= 0.4X (X*40%)
X-300000=0.40X
X-0.40X= 300000
0.60X= 300000
X=300000/0.06
X= 500000
Therefore sales is 500000
Sales- Cost of Goods sold = Gross Margin
500000- 300000 = 200000
Gross Margin = 200000
Gross Margin	200000
Less:General Expenses	24000
Less: Selling Expenses	96000
Net Income Before Tax (NIBT)	80000	x
Less: Income Tax	28000	0.35x
Net Income After Tax (NIAT)	52000	0.65x
NIAT is given
Let NIBT be x
NIBT= 52000*X/0.65x= 80000
Let General expense be 'x'
Gross margin - General exp.- Selling exp. = NIBT
200000- x- 4x= 80000
5x= 120000
x= 24000
Table 2
Particulars	Amount
Direct Material consumed	200000	(400000*50%)
Direct Labour	120000	(400000*30%)
Factory Overheads	80000	(400000*20%)
Total Manufacturing Overheads	400000
Add: Opening stock of WIP	NIL
Less: Closing stock of WIP	-25000
Cost of goods manufcactured	375000
Add: Opening stock of Finshed goods	25000	x
Less: Closing stock of Finished goods	-100000	4x
Cost of Goods Sold	300000
Add: General Expenses	24000
Add: Selling Expenses	96000
Total Cost	420000
COGM+op. FG.- Cl. FG.= COGS
Let opening Finnished goods be x
Closing = 4x
375000+X - 4X= 300000
X= 25000
4X= 100000
Purchase of Raw material = twice NIBT
2* 80000= 160000
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