Ac 505 Case Study I

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Case Study I

Materials purchased$325,000
Direct Labor$220,000
Sales$1,350,000
Gross Margin30%
Cost of Goods Available for Sale$1,020,000
Prime Costs$545,000
Manufacturer Overhead65% of Conversion cost
Direct Materials$325,000

Beginning Inventory numbers:
Raw Materials$41,000
Works in Process$56,000
Finished Goods$35,000

Formulas:

Prime cost = Direct Materials cost + Direct Labor cost
Conversion cost = Direct Labor cost + Manufacturing overhead cost (65% conversion)

Prime cost =325,000 + $220,000
545,000 ( Data given)

Trying to get to the Conversion cost.
Direct labor =
220,000 = 35% of conversion costs
= 220,000/.35 = 628,571.42

Manufacturing Overhead = 628,571 - 220,000
= 408,571
Prime cost = direct material cost + 220,000
545,000 = direct material cost + 220,000
545,000 – 220,000 = 325,000
Direct material cost = 325,000

Gross Margin = 30% of $1,350,000 = 405,000.
$1,350,000 – 405,000 = 945,000
Ending balance finished goods = 945,000

Cost of Goods Available for Sale$1,020,000
- Finished Goods Inventory (Beginning) 35,000
= Cost of Goods Manufactured $985,000

Cost of Goods sold:
Beginning balance finished goods$ 35,000
+ Cost of Goods Manufactured$985,000
Goods available for sale$1020,000
- Ending balance finished goods 945,000
Cost of goods sold $ 75,000

Manufacturing Costs:
Direct Materials$325,000
Direct Labor 220,000
Manufacturing overhead 408,471
Total$ 953,471

Cost of Goods Manufactured
Beginning works in process balance$56,000
Total manufacturing costs953,471
- Ending balance work in progress ? .
Cost of Good Manufactured $985,000

(Total Manufacturing cost + Beginning works in process balance) – Cost of Goods Manufactured 953,471 + 56,000 = 1009,471
1009,471 – 985,000 = $24,471

Cost of Goods Manufactured

Direct...
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