Question

ABC Company uses a Materials Inventory account to record both direct and indirect materials. ABC charges direct materials to WIP, while indirect materials are charged to the Factory Overhead account. During the month of April, the company has the following cost information: Total materials (direct and indirect) purchased Indirect materials issued to production Total materials issued to production Beginning materials inventory $ 90,000 30,000 110,000 50,000 The ending materials inventory cost is:

Answer 1

Part 1

Total materials purchased = $90,000

Total materials issued to production = $110,000

Beginning materials inventory = $50,000

Total materials issued to production = Beginning materials inventory + Total materials issued to production- Ending materials inventory

110,000 = 50,000+90,000- Ending materials inventory

Ending materials inventory = 140,000-110,000

= $30,000

The ending materials inventory cost is $30,000.

Third option is correct.

Part 2

Raw materials, beginning = $61,600

Raw materials, ending = 61,600 - 61,600 x 10%

= 61,600-6,160

= $55,440

Direct materials used = $379,000

Direct materials purchased = ?

Direct materials used = Raw materials, beginning + Direct materials purchased - Raw materials, ending

379,000 = 61,600+Direct materials purchased - 55,440

Direct materials purchased = 379,000+55,440-61,600

= $372,840

The amount of direct materials purchased during the year is $372,840.

First option is correct.

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