Question

XYZ Company recorded the following information related to their inventory
accounts for 2020:

                          January 1, 2020        December 31, 2020
Direct materials               37,000                   50,000
Work in process                38,000                   41,000
Finished goods                 22,000                   34,000

The following information was taken from XYZ Company's accounting records
for 2020:

Sales revenue ...........................................   $630,000
Direct materials purchased ..............................       ?
Depreciation, factory equipment .........................     34,000
Prime costs .............................................    250,000
Utilities (60% for factory; 40% for office building) ....     20,000
Sales commissions .......................................     29,000
Indirect materials ......................................     25,000
Depreciation, office equipment ..........................     30,000
Rent, factory building ..................................     56,000
Direct labor ............................................       ?
Advertising .............................................     75,000
Production supervisor's salary ..........................     81,000

Additional information:

1.  Direct labor comprised 35% of the conversion costs for 2020.

2.  The actual overhead cost for 2020 was equal to the overhead applied
    to production. Thus there was no overhead variance for 2020.

Calculate the direct materials purchased by XYZ Company in 2020.

Answer 1

A B DE Depreciation, factory equipment Utilities for factory Indirect materials Rent, factory building Production supervisor's salary Total manufacturing overheads manufacturing overheads' share in converison costs conversion costs Direct labor's share in conversion costs Direct labor cost $ 34,000 $ 12,000 $ 25,000 $ 56,000 $ 81,000 $ 208,000 65% $ 320,000 35% $ 112,000 Prime costs Direct labor cost Direct materials used in production Ending inventory of Direct materials Beginning inventory of Direct materials direct materials purchased in 2020 $ 250,000 $ 112,000 $ 138,000 $ 50,000 $ 37,000 $ 151,000

for formulas and calculations, refer to the image below -

Depreciation, factory equipment 34000 Utilities for factory =20000*60% Indirect materials 25000 Rent, factory building 56000 Production supervisor's salary 81000 Total manufacturing overheads =SUM(D2:06) 1 / manufacturing overheads' share in converison costs 10.65 conversion costs =D7/08 Direct labor's share in conversion costs 0.35 Direct labor cost =D9*D10 Prime costs Direct labor cost Direct materials used in production Ending inventory of Direct materials Beginning inventory of Direct materials direct materials purchased in 2020 250000 =D11 =D13-D14 50000 37000 =D15+D16-D17

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