Question

Cost Assignment Methods

Brody Company makes industrial cleaning solvents. Various chemicals, detergent, and water are mixed together and then bottled in 10-gallon drums. Brody provided the following information for last year:

Raw materials purchases	$250,000
Direct labor	140,000
Depreciation on factory equipment	45,000
Depreciation on factory building	30,000
Depreciation on headquarters building	45,000
Factory insurance	15,000
Property taxes:
Factory	20,000
Headquarters	18,000
Utilities for factory	34,000
Utilities for sales office	2,400
Administrative salaries	150,000
Indirect labor salaries	153,000
Sales office salaries	90,000
Beginning balance, raw materials	127,000
Beginning balance, work in process	124,000
Beginning balance, finished goods	84,000
Ending balance, raw materials	105,000
Ending balance, work in process	130,000
Ending balance, finished goods	79,000

Last year, Brody completed 100,000 units. Sales revenue equaled $1,200,000, and Brody paid a sales commission of 5 percent of sales.

Required:

1. Calculate the direct materials used in production for last year.

$

2. Calculate total prime cost.

$

3. Calculate total conversion cost.

$

4. Prepare a cost of goods manufactured statement for last year.

Answer 1

1
	Beginning raw materials inventory	$127,000
	Add: Purchases of raw materials	$250,000
	Total direct materials available	$377,000
	Less: ending inventory of raw materials	$105,000
	Total raw materials used in production	$272,000
2	Calculation of Prime Cost
	Total raw materials used in production	$272,000
	Add: Direct Labor	$140,000
	Prime Cost	$412,000
3	Calculation of Conversion Cost
	Direct Labor	$140,000
	Total Manufacturing Overhead	$297,000
	Conversion Cost	$437,000
	Manufacturing overhead
	Depreciation on factory equipment	$45,000
	Depreciation on factory building	$30,000
	Factory insurance	$15,000
	Factory property taxes	$20,000
	Factory utilities	$34,000
	Indirect labor salaries	$153,000
	Total overhead	$297,000
4
	Beginning raw materials inventory	$127,000
	Add: Purchases of raw materials	$250,000
	Total direct materials available	$377,000
	Less: ending inventory of raw materials	$105,000
	Total raw materials used in production	$272,000
	Add: Direct Labor	$140,000
	Add: Manufacturing overhead	$297,000
	Total manufacturing costs	$709,000
	Add: beginning work in process	$124,000
		$833,000
	Less: ending work in process	$130,000
	Cost of goods manufactured	$703,000