O’Reilly Manufacturing Co.’s cost of goods sold for the month ended July 31 was $345,000. The ending work in process inventory was 90% of the beginning work in process inventory. Factory overhead was 50% of the direct labor cost. No indirect materials were used during the period. Other information pertaining to O’Reilly’s inventories and production for July is as follows:
REQUIRED:
1. Prepare a statement of cost of goods manufactured for the month
of July. (Hint: Set up a statement of cost of goods manufactured,
putting the given information in the appropriate spaces and solving
for the unknown information. Start by using cost of goods sold to
solve for the cost of goods manufactured.)
2. Prepare a schedule to compute the prime cost incurred during
July.
3. Prepare a schedule to compute the conversion cost charged to
Work in Process during July.
Homework Answers
Answer :
(1)
| O’Reilly Manufacturing company | ||
| Statement of cost of goods manufactured | ||
| For the month ended july 31, 20 - - | ||
| Materials : | ||
| Beginning Raw Material Inventory | $ 20000 | |
| Add - Purchase of raw material | $ 110000 | |
| Total cost of available material | $ 130000 | |
| Less - Ending Raw material inventory | $ 26000 | |
| Cost of Direct material used in production | $ 104000 | |
| Direct Labor | $ 160000 | |
| Factory overhead | $ 80000 | |
| Total Manufacturing cost | $ 344000 | |
| ADD - Beginning WIP inventory | $ 40000 | |
| Total | ||
| Less - Ending WIP Inventory | $ 36000 | |
| Cost of goods manufactured | $ 348000 |
Working note -1
Ending WIP Inventory = $ 40000*90% = $ 36000
Working note -2
Cost of goods manufactured =Cost of goods sold + Ending Finished goods inventory - Opening Finished goods Inventory
= $ 345000 + $ 105000 - $ 102000
= $ 348000
Working note -3
Manufacturing cost = Cost of goods manufactured + Ending WIP Inventory - Beginning WIP inventory
= $ 348000 + $ 36000 - $ 40000
= $ 344000
Working note -4
Let Direct Labor = D
Factory overhead = Direct labor*50%
Material used in production + Direct Labor + Factory overhead = Manufacturing cost
= $ 104000 + Direct Labor + Direct Labor*50 % = $ 344000
= $ 104000 + D + D* 50% = $ 344000
= 1.50 D = $ 240000
D = $ 160000
Direct labor = $ 160000
Factory overhead = $ 160000*50% = $ 80000
(2)
| O’Reilly Manufacturing company | |
| Schedule to compute prime cost | |
| For the month ended july 31, 20 - - | |
| Direct Material used | $ 104000 |
| Direct Labor Incurred | $ 160000 |
| Prime cost incurred during july | $ 264000 |
(3)
| O’Reilly Manufacturing company | |
| Schedule to compute Conversion cost | |
| For the month ended july 31, 20 - - | |
| Direct Labor Incurred | $ 160000 |
| Factory overhead | $ 80000 |
| Conversion cost incurred during July | $ 240000 |
Add Answer to:
O’Reilly Manufacturing Co.’s cost of goods sold for the month
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1. Prepare a statement of cost of goods manufactured for the month of July. (Hint: Set...
1. Prepare a statement of cost of goods manufactured
for the month of July. (Hint: Set up a statement of cost of goods
manufactured, potting the given information in the appropriate
spaces and solving for the unknown information. Start by using cost
of goods sold to solve for the cost of goods manufactured.
2. Prepare a schedule to compute the prime cost
incurred during July.
3. Prepare a schedule to compute the conversion cost
charged to Work in Process during...
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1. Prepare a statement of cost of goods manufactured
for the month of July. (Hint: Set up a statement of cost of goods
manufactured, potting the given information in the appropriate
spaces and solving for the unknown information. Start by using cost
of goods sold to solve for the cost of goods manufactured.
2. Prepare a schedule to compute the prime cost
incurred during July.
3. Prepare a schedule to compute the conversion cost
charged to Work in Process during...
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