Question

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Group Problem 3 Unknowns, T-accounts, Schedules Company's cost of goods sold for the month ended March 31, 2003, was $345.000. process inventory was 90% of beginning work in process inventory. Factory overhead was 50% of direct labor cost. Other information pertaining to Mat Company's inventories and production for the month of March is as follows: Beginning inventories-March 1 Direct materials Work in process Finished goods Purchases of direct materials during March Ending inventories-March 31 Direct materials Work in process Finished goods $ 20,000 40,000 102,000 110,000 26,000 105,000 Required: (Hint: Use T-accounts.) 1. Compute the cost of goods manufactured for the month of March. 2. Compute the conversion cost charged to work in process during March. 3. Compute the prime cost incurred during March.

Answer 1

1	MET COMPANY
	Schedule of Cost of Goods Manufactured
	For Month Ended March 31
	Work in process, March 1		$40,000
	Production costs:
	Direct materials	$104,000
	Direct labor	$160,000
	Factory overhead	$80,000	$344,000
			$384,000
	Less: Work in process, March 31		$36,000
	Cost of goods manufactured		$348,000
Working
a	Cost of goods sold ($345,000) = Cost of goods manugactured + beginning finished goods inventory($102,000) - ending finished goods inventory($105,000)
	Cost of goods manufactured = $348,000
b	Beginning raw materials inventory	$20,000
	Add: Purchases of raw materials	$110,000
	Total direct materials available	$130,000
	Less: Ending inventory of raw materials	$26,000
	Total raw materials used in production	$104,000
c	Ending Work in process = 90% x $40,000 = $36,000
d	Production costs for March ($344,000) - direct materials ($104,000) = direct labor and factory overhead ($240,000)
e	Let x = direct labor
	1.5x = $240,000
	x = $160,000 i.e. direct labor
	0.5x = $80,000 i.e. factory overhead
2	Conversion cost:
	Direct labor	$160,000
	Factory overhead	$80,000
		$240,000
3	Prime cost:
	Direct materials	$104,000
	Direct labor	$160,000
		$264,000