Acct 505 Case Study 1

Topics: Manufacturing, Supply chain management terms, Inventory Pages: 3 (398 words) Published: October 31, 2012
Case Study I Solution

The following cost items are needed before a schedule of cost of goods manufactured can be prepared:

Materials used in production:
Prime Costs $545,000.00
Less Direct Labor Cost $220,000.00
Direct Materials Cost $325,000.00

Manufacturing Overhead Cost:

Direct Labor Cost/ Percentage of Conversion Cost:
rounded to nearest dollar( this is total conversion cost)

100%-65% = 35%

Conversion Cost $628,571.00
Less Direct Labor Cost $220,000.00
Manufacturing Overhead $408,571.00

Cost of Goods Manufactured:

Cost of Goods Available for Sale $1,020,000.00
Less: finished goods inventory, beginning $35,000.00
Cost of Goods Manufactured $985,000.00

The easiest way to proceed from this point is to place all of the amounts that are known in a partially
completed schedule of cost of goods manufactured and a partially completed income statement. Then
fill in the missing amounts by analyzing the available data.

Direct Materials:
Raw Materials Inventory, beginning $41,000.00
Add: Purchases of Raw Materials $325,000.00
Raw Materials Available for use $366,000.00
Deduct: Raw Materials inventory, ending $41,000.00
Raw Materials Used in Production ( See above) $325,000.00
Direct Labor Cost $220,000.00
Manufacturing Overhead Cost (See Above) $408,571.00
Total Manufacturing Costs $953,571.00
Add: Work in Process inventory, beginning $56,000.00
Deduct: Work in Process inventory, ending $56,000.00
Cost of Goods Manufactured $985,000.00

Therefore, A is...
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