Question

1. PrimaGirl is a company that manufactures cosmetics. On January 1, the Work-In-Process Inventory account had a balance of $1,000. At the end of the year, the Work-In-Process Inventory account had a balance of $750. In 2019, PrimaGirl had the following information regarding their production costs. What is the company's cost of goods manufactured?

   Prime Cost	17,000
   Direct Material	6,000
   MOH Allocated	14,500
   MOH Actual	13,750

   		31,750
   		31,000
   		51,500
   		20,750

Answer 1

Answer)

Calculation of cost of goods manufactured

Cost of goods manufactured = Prime Cost + Allocated Manufactured Overheads + Beginning Work in process inventory – ending work in process inventory

                                                          = $ 17,000 + $ 14,500 + $ 1,000 - $ 750

                                                          = $ 31,750

Therefore the cost of goods manufactured is $ 31,750.

Notes:

Allocated overheads are included in the cost of goods manufactured because:

· Total Actual overhead are available at the end of the year. Thus a predetermined overhead rate is used (based on machine hours, labor hours, etc.) in allocation of overheads to cost of goods manufactured.

· If Actual overheads incurred are more than allocated overheads, the overheads are said to be under applied. However, of actual overheads incurred are less than allocated overheads, the overheads are said to be over applied. The over applied or under applied overheads (as the case may be) are adjusted in the cost of goods sold at the end of the year.