Question

Road Warrior Corporation began operations early in the current year, building luxury motor homes. During the year, the company started and completed 50 motor homes at a cost of $60,000 per unit. Of these, 48 were sold for $95,000 each and two remain in finished goods inventory. In addition, the company had six partially completed units in its factory at year-end. Total costs for the year (summarized alphabetically) were as follows.

Direct materials used		$	714,000
Direct labor			812,000
Income tax expense			100,000
General and administrative expenses			500,000
Manufacturing overhead			1,700,000
Selling expenses			500,000

Required:

a. Compute the total manufacturing costs charged to work in process for the current year.

b. Compute the cost of finished goods manufactured for the current year.

c. Compute the cost of goods sold for the current year.

d. Compute the gross profit on sales for the current year.

e. Compute the ending inventories of (1) work in process and (2) finished goods for the current year.

Answer 1

a) Total manufacturing costs Direct material used Direct labor Manufacturing overhead Total Manufacturing costs 714,000 812,000 1,700,000 3,226,000 Total Manufacturing costs 3,226,000 b) Cost of finished goods manufactured Units started and completed during the year Cost per unit Cost of finished goods manufactured ($ 60,000 x 50) 50 60,000 3,000,000 $ Cost of finsihed goods manufactured $ 3,000,000 c) Cost of goods sold Units sold Cost per unit Cost of goods sold ($ 60,000 x 48) 48 60,000 2,880,000 Cost of goods sold 2,880,000 d) Gross Profit Sales revenue ($ 95,000 x 48) Less: Cost of goods sold Gross Profit 4,560,000 (2,880,000) 1,680,000

e) Ending Balances 1) Work in Process Manufacturing costs Less: Cost of finished goods manufactured Work in Process, Ending Balance 3,226,000 (3,000,000) 226,000 2) Finished Goods Cost of finished goods manufactured Less: Cost of goods sold Finished Goods, Ending Balance 3,000,000 (2,880,000) 120,000 1) Work in Process 2) Finsihed Goods Inventory Ending Balance $ 226,000 $ 120,000