Question

Question 5: The Enrique Company recorded the following transactions for February 20x1:

	Materials	Work in Process	Finished Goods
Purchases	$100,000
Beginning inventory	180,000	$    8,000	$           E
Ending inventory	A	30,000	30,000
Direct materials used		90,000
Direct labor		B
Manufacturing overhead (includes indirect materials used of $10,000)		115,000
Transferred to finished goods		C
Cost of goods sold			D

Sales were $560,000, with sales prices determined by adding a 40% markup to the firm's manufacturing cost. The total cost of direct materials used, direct labor, and manufacturing overhead during the month was $285,000.
Note: The materials account includes both direct materials and indirect materials.

Required:

Calculate the missing values.

Answer 1

Calculation of missing values:

A) Ending Inventory of Materials:
Beginning inventory	$180,000
Add: Purchases	$100,000
Less: Direct materials used	($90,000)
Less: Indurect materials used	($10,000)
Ending inventory of Materials	$180,000
B) Direct Labor:
Total cost of direct materials used, direct labor and manufacturing overheads	$285,000
Less: Direct materials used	($90,000)
Less: Manufacturing overheads	($115,000)
Direct Labor	$80,000
C) Transferred to Finished Goods:
Beginning work in process	$8,000
Add: Direct Materials used	$90,000
Add: Direct Labor	$80,000
Add: Manufacturing overheads	$115,000
Less: Ending work in process	($30,000)
Transferred to Finished goods	$263,000
D) Cost of Goods Sold:
Direct Materials used	$90,000
Add: Direct Labor	$80,000
Add: Manufacturing overheads	$115,000
Total manufacturing costs	$285,000
Cost of goods sold will be 40% mark up on manufacturing costs
Therefore -
Cost of goods sold ($285,000*140/100)	$399,000
E) Beginning Finished Goods:
Cost of goods sold	$399,000
Add: Ending finished goods inventory	$30,000
Less: Transferred to Finished Goods	($263,000)
Beginning Finished Goods	$166,000