StudyQuestionHub

Q38PGB

Question

Determining the flow of costs through a manufacturer’s inventory accounts 

True Fit Shoe Company makes loafers. During the most recent year, True Fit incurred total manufacturing costs of \(21,900,000. Of this amount, \)2,600,000 was direct materials used and \(14,800,000 was direct labor. Beginning balances for the year were Direct Materials, \)700,000; Work-in-Process Inventory, \(1,500,000; and Finished Goods Inventory, \)1,100,000. At the end of the year, balances were Direct Materials, \(800,000; Work-in-Process Inventory, \)2,000,000; and Finished Goods Inventory, $1,080,000. 

Requirements Analyze the inventory accounts to determine: 

1. Cost of direct materials purchased during the year. 

2. Cost of goods manufactured for the year. 

3. Cost of goods sold for the year.

Step-by-Step Solution

Verified
Answer

The purchase of direct materials is $2,700,000, the cost of goods manufactured is $21,400,000 and the cost of goods sold is $21,420,000.

1Step-by-Step Solution Step 1: Calculation of cost of direct materials purchased

Purchase of  directmaterials=Direct materials used+Ending direct materials-Beginning Direct Materials                                                   =$2,600,000+$800,000-$700,000                                                   =$2,700,000

2Step 2: Calculation of cost of goods manufactured

Cost of good manufactured=Beginning WIP Inventory+Total Manufacturing cost incurred-Ending WIP inventory                                             =$1,500,000+$21,900,000-$2,000,000                                             =$21,400,000

3Step 3: Calculation of cost of goods Sold

Cost of goods sold=Beginning Finished Goods Inventory+COGM-Ending Finished Goods Inventory                                  =$1,100,000+$21,400,000-$1,080,000                                  =$21,420,000

Previous
Q37PGB
Next
Q38P

Other exercises in this chapter

Q36PGB
Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company Chewy Bones manufactures its own brand of pet chew b
View solution
Q37PGB
Preparing a schedule of cost of goods manufactured and an income statement for a manufacturing company Certain item descriptions and amounts are missing fr
View solution
Q38P
Determining the flow of costs through a manufacturer’s inventory accounts True Fit Shoe Company makes loafers. During the most recent year, True Fit
View solution
Q39PGB
Preparing an income statement and calculating unit cost for a service company The Glass Doctors repair chips in car windshields. The company incurred the f
View solution