Question

“Of all the times this hard drive could crash, it had to be now,” Sarah cried. “How can I finish the June financial reports without all the information? I knew I should have backed up the disk last night before I left work.” News of the disaster traveled quickly through the office, and people began to stop by her cubicle to offer their help.

Jason was the first to the rescue. “It might not be as bad as you think, Sarah. I have the financial reports from May right here. According to the balance sheet, we had a total inventory of $170,000 at the end of May. And I remember that the Finished Goods Inventory was 60% of that amount.”

“I just finished the inventory counts last night,” Matthew chimed in from across the hall. “According to my tally sheets, we finished June with $38,000 in Direct Materials Inventory, $21,000 in Work in Process Inventory, and $40,000 in Finished Goods Inventory. This was a 25% increase from the balances in Direct Materials Inventory at the end of May. I bet with a little more investigative work, we can get all the numbers you need to complete the reports.”

Kimberly called from Payroll to tell Sarah that the company had paid a total of $23,000 for direct labor during June. Juan, the billing supervisor, e-mailed Sarah that the company had sent out invoices to customers totaling $501,000.

Sarah knew that the overhead rate was 200% of direct labor costs. She also knew that the company priced its product using a 100% markup on the cost of goods sold. Armed with all this information, she sat down to reconstruct the inventory accounts for June.

(a1)

(1) Calculate the begininng finished goods. (Round answer to the nearest dollar amount, e.g. 5,275.)

Begininng finished goods

$enter the begininng finished goods amount in dollars

(2) Calculate the beginning direct materials.

Beginning direct materials

$enter the beginning direct materials amount in dollars

(3) Calculate the beginning work in process.

Beginning work in process

$enter the beginning work in process amount in dollars

(4) Calculate the cost of goods sold. (Round answer to the nearest dollar amount, e.g. 5,275.)

Cost of goods sold

$enter the cost of goods sold amount in dollars

(5) Calculate the cost of goods manufactured. (Round answer to the nearest dollar amount, e.g. 5,275.)

Cost of goods manufactured

$enter the cost of goods manufactured amount in dollars

(6) Calculate the direct material used. (Round answer to the nearest dollar amount, e.g. 5,275.)

Direct material used

$enter the direct material used amount in dollars

(7) Calculate the amount of purchases. (Round answer to the nearest dollar amount, e.g. 5,275.)

Purchases

$enter the purchases amount in dollars

(8) State the amount of direct labor for the month.

Direct labor

$enter the direct labor amount in dollars

(9) Calculate the amount of applied overhead.

Overhead

$enter the overhead amount in dollars

Answer 1

1) Beginning Finished goods Inventory $102,000 60% of $170,000 $38,000 2) Beginning Direct materials Closing Direct material inventory 25% higher than May end balance So Beginning Inventory $30,400 $38,000/125% 3) Beginning Work in process Total Inventory Less: Finished goods inventory Raw material inventory Beginning Work in process $170,000 $102,000 $30,400 $37,6001 4) Cost of goods sold Sales Mark up Cost of goods sold $501,000 $250,500 100% of Cost of goods sold $250,500 5) Cost of goods manufactured Cost of goods sold Add: Closing Inventory of FG Cost of goods available for sale Less: Opening Inventory of FG Cost of goods manufactured $250,500 $40,000 $290,500 $102,000 $188,500 6) Direct material used Total manufacturing cost Less: Direct labor Manufacturing overheads Direct material used $171,900 $23,000 $46,000 200% of Direct labor cost $102,900 Cost of goods manufactured Add: Closing WIP Inventory Total manufacturing cost to account for Less: Beginning WIP Inventory Total manufacturing cost $188,500 $21,000 $209,500 $37,600 $171,9001 7) Amount of Purchase Direct material used Add: Closing Inventory of Direct material Cost of raw materials available Less: Opening Inventory of Direct material Amount of Purchase $102,900 $38,000 $140,900 $30,400 $110,500 8) Direct labor for the month $23,000 9) Amount of overhead applied $46,000 200% of $23,000