Acct 505 Case Study 1

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 $1,009,571.00 Deduct: Work in Process inventory, ending $56,000.00 Cost of Goods Manufactured $985,000.00 Therefore, A is