Question

Last night, the sprinkler system at Plant A was accidentally set off. The ensuing deluge destroyed most of the cost records in Plant A for the month just completed (May). The plant manager has come to you in a panic-he has to complete his report for head office by the end of today. He wants you to give him the numbers he needs for his report. He can provide you with some fragments of information he has been able to salvage: Raw materials: $24,000 Work in process: 55,300 15,700 400,600 Finished goods: Beginning Ending Beginning Sold in May Ending Beginning Beginning Ending 51,800 0 Manufacturing overhead: Accrued wages payable: 11,800 18,700 Other information: 1. Total direct materials requisitions for the month were $180,500. 2. A total of 9,600 direct labour hours were worked during the month at an average wage of $15/hour. 3. Manufacturing overhead of $100,600 was incurred during the period. 4. On May 31, the ending inventory of work in process is $5,400. Calculate the following:

Answer 1

a.The Material Purchased during May = (Ending Raw Materials - Beginning Raw Materials) + Material Requisitions

  = ( $55,300 - $24,000 ) + $1,80,500

Materials Purchased during May = $2,11,800.

b.Amount paid to Labour Force in May = (Beginning Wages payable + Labour Hours worked) - Ending Wages Payable

= [ $11,800 + (9600 hours x $15/hour) ] - $18,700

= [ $11,800 + $1,44,000] - $18,700

Amount Paid to Labour Force in May = $1,37,100.

c. The cost of completed goods that are transferred out of WIP inventory into finished goods inventory is called the Cost of Goods Manufactured (COGM).

COGM = Beginning Work In Process Inventory + Total Manufacturing Costs - Ending Work In Process Inventory

Total Manufacturing Cost = Raw Materials Used + Direct Labour + Manufacturing Overhead

Total Manufacturing Cost = $1,80,500 + $1,37,100 + $1,00,600 = $4,18,200.

COGM = $15,700 + $4,18,200 - $5,400

COGM = $4,28,500.

d.Cost of Finished Goods Inventory = Beginning Finished Goods Inventory + Cost of Goods Manufactured - Cost of Goods Sold

$51,800 = Beginning Finished Goods Inventory + $4,28,500 - $4,00,600.

$51,800 + $4,00,600 = Beginning Finished Goods Inventory + $4,28,500.

$4,52,400 = Beginning Finished Goods Inventory + $4,28,500

Beginning Finished Goods Inventory = $4,52,400 - $4,28,500

Beginning Finished Goods Inventory = $23,900.