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Chapter 16: Q19E (page 891)

Computing cost of goods manufactured

Consider the following partially completed schedules of cost of goods manufactured. Compute the missing amounts.

Banner, Inc. Larry’s Bakery Sports Gear

Beginning Work-in-Process Inventory \( (a) \) 40,800 \( 2,200

Direct Materials Used 14,400 35,900 (g)

Direct Labor 10,300 20,100 1,900

Manufacturing Overhead (b) 10,000 900

Total Manufacturing Costs Incurred during the Year 45,200 (d) (h)

Total Manufacturing Costs to Account for 55,400 (e) 8,300

Ending Work-in-Process Inventory (c) (25,500) (2,600)

Cost of Goods Manufactured \) 50,500 \( (f) \) (i)

Short Answer

Expert verified

The required computation of the cost of goods manufactured is done.

Step by step solution

01

Step-by-Step SolutionStep 1 Definition of cost of goods manufactured

The cost of goods manufactured is defined as the manufacturing costs of the goods that are finished in the production process.

02

Computation of cost of goods manufactured


Computation of cost of goods manufactured

Banner Inc

Larry’s Bakery

Sports Gear

Beginning Work-in-Process Inventory

A $10,200

$40,800

$2,200

Direct Material Used

$14,400

$35,900

G $3,300

Direct Labour

$10,300

$20,100

$1,900

Manufacturing Overhead

B $20,500

$10,000

$900

Total manufacturing cost incurred during the year

$45,200

D $66,000

H $6,100

Total manufacturing costs to account for

$55,400

E $106,800

$8,300

Ending work-in-process inventory

C -$4,900

-$25,500

-$2,600

Cost of goods manufactured

$50,500

F $81,300

I $5,700

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Most popular questions from this chapter

Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Using the data on the previous page, calculate total current assets for each company

Power Switch, Inc. designs and manufactures switches used in telecommunications. Serious flooding throughout North Carolina affected Power Switch’s facilities. Inventory was completely ruined, and the company’s computer system, including all accounting records, was destroyed.

Before the disaster recovery specialists clean the buildings, Stephen Plum, the company controller, is anxious to salvage whatever records he can to support an insurance claim for the destroyed inventory. He is standing in what is left of the accounting department with Paul Lopez, the cost accountant.

“I didn’t know mud could smell so bad,” Paul says. “What should I be looking for?”

“Don’t worry about beginning inventory numbers,” responds Stephen, “we’ll get them from last year’s annual report. We need first-quarter cost data.”

“I was working on the first-quarter results just before the storm hit,” Paul says. “Look, my report is still in my desk drawer. All I can make out is that for the first quarter, direct material purchases were \(476,000 and direct labor, manufacturing overhead, and total manufacturing costs to account for were \)505,000, \(245,000, and \)1,425,000, respectively. Wait! Cost of goods available for sale was \(1,340,000.”

“Great,” says Stephen. “I remember that sales for the period were approximately \)1,700,000. Given our gross profit of 30%, that’s all you should need.”

Paul is not sure about that but decides to see what he can do with this information. The beginning inventory numbers were:

• Direct Materials, \(113,000

• Work-in-Process, \)229,000

• Finished Goods, $154,000

Requirements

1. Prepare a schedule showing each inventory account and the increases and decreases to each account. Use it to determine the ending inventories of Direct Materials, Work-in-Process, and Finished Goods.

2. Itemize a list of the cost of inventory lost.

Describe a service company, and give an example.

Identify each cost as a period cost or a product cost. If it is a product cost, further indicate if the cost is direct materials, direct labor, or manufacturing overhead. Then determine if the product cost is a prime cost and/or a conversion cost.

11.Salary of the sales manager

How does a merchandising company calculate unit cost per item?
See all solutions

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