In: Accounting
Problem 4-23
“Of all the times this hard drive could crash, it had to be now,
” Marcy cried. “How can I finish the June financial reports without
all the information? I knew I should have backed up the disk last
night before I left work.” News of the disaster traveled quickly
through the office, and people began to stop by her cubicle to
offer their help.
John was the first to the rescue. “It
might not be as bad as you think, Marcy. I have the financial
reports from May right here. According to the balance sheet, we had
a total inventory of $99,000 at the end of May. And I remember that
the Finished Goods Inventory was one-third of that amount.”
“I just finished the inventory counts
last night,” Peter chimed in from across the hall. “According to my
tally sheets, we finished June with $80,000 in Direct Materials
Inventory, $52,000 in Work in Process Inventory, and $25,000 in
Finished Goods Inventory. This was a 100% increase from the
balances in Direct Materials Inventory and Work in Process
Inventory at the end of May. I bet with a little more investigative
work, we can get all the numbers you need to complete the
reports.”
Sally called from Payroll to tell
Marcy that the company had paid a total of $36,000 for direct labor
during June. Juan, the billing supervisor, e-mailed Marcy that the
company had sent out invoices to customers totaling $291,000.
Marcy knew that the overhead rate was
200% of direct labor costs. She also knew that the company priced
its product using a 50% markup on the cost of goods sold. Armed
with all this information, she sat down to reconstruct the
inventory accounts for June.
T-accounts for
Direct materials
Work in process
finished goods
Answere: Given,
Mark up = 50% of cost of goods sold
Hence, mark up = 50/150 of sales revenue
Sales revenue = $291,000
Hence, mark up = 291,000 x 50/150
= $97,000
Cost of goods sold = Sales - Mark up
= 291,000 - 97,000
= $194,000
(1) begininng finished goods = $33,000
(2) beginning direct materials = $40,000
(3) beginning work in process = $26,000
(4) cost of goods sold = $194,000
(5) cost of goods manufactured. = $186,000
(6) direct material used = $104,000
(7) amount of purchases. = $144,000
(8) amount of direct labor = $36,000
(9) amount of applied overhead = $72,000
Thank you!