Question

JAG Sporting Goods Company manufactured 100,000 units in 2020 and reported the following costs: Sandpaper $ 32,000 Leasing costs-plant $ 384,000 Materials handling 320,000 Depreciation equipment 224,000 Coolants & lubricants 42.400 Property taxes-equipment 32,000 Indirect manufacturing labor 275,200 Fire insurance-equipment 16,000 Direct manufacturing labor 2.176,000 Direct material purchases 3,500,000 Direct materials, 1/1/16 384,000 Direct materials, 12/31/16 275,200 Finished goods, 1/1/16 650,000 Sales revenue 12,800,000 Finished goods, 12/31/16 1,280,000 Sales commissions 640,000 Work-in-process, 1/1/16 86.000 Sales salaries 576,000 Work-in-process, 12/31/16 64,000 Advertising costs 480,000 Administration costs 800,000 Required: (a) What is the amount of direct materials used during 2020? [3 points) (b) What manufacturing costs were added to WIP during 2020? [3 points) (c) What is cost of goods manufactured for 2020? (3 points) (d) What is cost of goods sold for 2020? [3 points)

Answer 1

Answer

a Calculation of direct material used

Particulars	$
Direct materials purchased	3,500,000
Add beginning direct materials	384,000
Direct materials available for production	3,884,000
Less Ending direct materials	(275,200)
Direct materials used	3,608,800

$3,608,800 is the raw materials used for production.

b Calculations of Total manufacturing cost

Particulars	$	$
Direct materials used		3,608,800
Direct manufacturing labour		2,176,000
Prime cost		5,784,800
Add Manufacturing overhead:
Material handling	320,000
Depreciation of equipment	224,000
Coolant & lubricants	42,400
Property tax equipment	32,000
Leasing cost plant	384,000
Fire insurance equipment	16,000
Indirect manufacturing labour	275,200
Sand paper	32,000
Total manufacturing overhead		1,325,600
Total manufacturing cost		7,110,400

Total manufacturing cost added to work in process inventory is $7,110,400.

c Calculation of cost of goods manufactured

Particulars	$
Beginning work in process	86,000
Add total manufacturing cost	7,110,400
	7,196,400
Less Ending work in process	(64,000)
Cost of goods manufactured	7,132,400

$7,132,400 is the cost of goods manufactured

d Calculation of Cost of goods sold

Particulars	$
Beginning finished goods inventory	650,000
Add cost of goods manufactured	7,132,400
Cost of goods available for sales	7,782,400
Less Ending finished goods inventory	(1,280,000)
Cost of goods sold	6,502,400

$6,502,400 is the cost of goods sold.

The above are the separate and detailed calculations of direct material used, total manufacturing cost, cost of goods manufactured and cost of goods sold in 2020.

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